TotalEnergies SE

PAR:TTE

Earnings Call Transcript 2020-Q1

[Operator]

Ladies and gentlemen, thank you for standing by and welcome to the Total Q1 2020 Results Conference Call. [Operator Instructions] Today, there will be 2 presentations: Total's first quarter results and 2020 action plan update followed by a question-and-answer session; then a presentation on Total's climate ambition followed by another question-and-answer session. [Operator Instructions] I must advise you that this conference is being recorded today. And I would now like to hand the conference over to Mr. Patrick Pouyanné, Chairman and CEO of Total. Please go ahead, sir.

[Patrick Pouyanné, Chairman, CEO & President]

Good afternoon, everybody. Welcome to our Q1 conference call, and let me start by saying that I hope that all of you and your families are safe in front of this pandemic, which is COVID-19, and that you are coping well in these extraordinary times. I really think that the word extraordinary is the right word to literally sense, I would say. None of us ever thought we could experience such macro environment, such an oil price crisis at the same time.So we have a lot of ground to cover this afternoon for this call. So it's why I joined Jean-Pierre, not to leave him alone and to cover the various crises that we are facing. We are facing again this health care crisis, and our priority is the health of all our people and the continuity of our operations. And I would like to just to say -- to pay a tribute to all the efforts of and commitment and responsiveness of all our teams around the world who are working together to ensure the continuity of our operations during the crisis. Really, they are doing a great job. So thank you to them, all of them. The second crisis, the oil price crisis. It's unprecedented, I would say. I had -- in my speech, I always said that there is volatility, and we experience volatility. It's difficult. I know that the oil industry would like to see a stable world. I think we are absolutely unable in this industry to stabilize anything. We'll come back on it. And it has, of course, some consequence that it stretches the financial frameworks of our company. And we will come back on it with the update of the action plan.But I just would like to tell you that, of course, over the past 5 years, we have strengthened our balance sheet. We have high-graded our asset base. We have lowered the breakeven. And so fundamentally, and I will come back on that, we consider that Total is very well positioned to weather this storm. I would even add that myself, I become a veteran of tough times. I took my position in 2014, just before the first downturn there again. So we begin to have some good recipes to face the situation. And fundamentally, what we believe, is that priority should be given to self-help. This is, I think, the essence of all the plans we will present to you.But at the same time, as you know, we are also to prepare the medium and long term, that's true, but we have these immediate and short-term challenges, which means, of course, the evolution of the energy landscape and the climate policy. So that's clear that we have worked together. Today, by the way, I think it's a good symbol, but at the same time, we speak about the immediate challenge and action plans and also medium and long term.We have issued a renewed climate policy, which is a result of quite a lot of work with the Board of Directors, and including the engagement with some investors of the Climate Action 100+ coalition. I will come back on it. And so I will address that issue as well in the second part. In order to avoid to mix all the Q&A, we proposed to have 2 separate, different session. One, after Jean-Pierre has introduced the Q1 results and myself the update of the action plan, we'll have the first session. And then we'll go to the medium and long term because I'm afraid if we mix both, all the questions will be more in the short term than the medium and long term. But I think it's also important to have some time. So I propose to dedicate around 150 minutes for the first part and 45 minutes to the second part. So now I will leave the floor to -- before there was P2, now it's JP2. So I'm P1 and JP2 -- so I need to give him a nickname as well. So JP2 will give you all the Q1 results.

[Jean-Pierre Sbraire]

Thank you, Patrick. So as you know, the first quarter environment was marked by a 30% drop in oil and gas prices, a 20% decrease in European refining margins and a collapse in product demand in line with the COVID-19 crisis. In this context, Total nonetheless reported resilient results. The debt-adjusted cash flow was $4.5 billion, down 31% year-on-year, and the adjusted net income was $1.8 billion, a decrease of 35% year-on-year. Let's move to the production. So the Upstream production was 3.1 million barrels of oil equivalent per day during the first quarter, an increase of 5% compared to a year ago and stable compared to the previous quarter. So we continue to benefit from ramp-ups mainly for the major offshore fields in the North Sea, Culzean and Johan Sverdrup and Egina in Nigeria, as well as our LNG giant fields like Yamal and Ichthys. So the contribution of these ramp-ups were partially offset by the security situation in Libya, the redevelopment of the Tyra field in Denmark and natural decline of about 3% per year.Our Integrated Gas, Renewables & Power segment, so iGRP, reported again strong first quarter results. Adjusted net operating income was $0.9 billion, an increase of more than 50% year-on-year. In addition to higher volumes, these strong results reflect the resilient pricing of LNG in our portfolio, notably the contract sales. It reflects as well the value of global integration, including the increased use of European regas capacities and the strong performance of LNG trading. Renewable activities increased their contribution as well during this quarter. As you know, we are committed to pursuing high-quality growth for this iGRP segment, which is key to the energy transition and to further diversifying our integrated model, notably into low-carbon electricity. And I know that Patrick will come back on that later. The stability and sustainability of the iGRP contribution strengthens our performance, particularly since the low-carbon electricity business is outside of the oil price cycle. In the first quarter, we continue to expand iGRP along the entire integrated gas and low-carbon electricity chain. LNG sales increased by 27% year-on-year, close to 10 million tonnes in the first quarter, thanks to the ramp-ups of Yamal and Ichthys as well as the start-up of the first 2 Cameron LNG trains in the U.S. Gross installed renewable power generation capacity increased by almost 70%. Low-carbon electricity generation increased by 10%. We continue to grow our customer base rapidly, up 9% in the quarter, and we announced almost 6 gigawatts of new projects. Let's move to E&P segments. So this segment generated adjusted net operating income of $0.7 billion in the first quarter, down from $1.7 billion a year ago. So how can we explain this $1 billion decrease? It's due mainly to the price environment, of course, and the deterioration of the oil and gas prices that has a negative impact of about $1.2 billion. And this effect was partially compensated by the increase in volume mainly from the ramp-up I mentioned already. Important, I think, to point out is that E&P maintained continuity of normal operations throughout the quarter. We had no virus-related stoppages and significant supply chain issues. We are making progress on the major projects under construction. And we announced, by the way, 2 discoveries in Surinam, plus 1 in the U.K. North Sea.Refining & Chemicals generated $0.4 billion of adjusted net operating income, down 50% compared to the same quarter last year. R&C was impacted, obviously, by the 20% decrease in refining margins, reflecting weak product demand, and by the reduction in refinery utilization to 69%. The Feyzin refinery in France, the SATORP refinery in Saudi Arabia were both shut down for planned maintenance in the first quarter. And as you know, the distillation unit at Normandy remained shut down after the fire incident occurred last December. Petrochemical is a lot better than refining, benefiting from the lower feedstock costs. Steam cracker utilization was above 80%. Marketing & Services generated $0.3 billion of adjusted net operating income, a decrease of 12% compared to the first quarter 2019. M&S, Marketing & Services, was also affected by low product demand, notably in China, during the quarter because of COVID-19, but also in France in March. Sales were down 10% year-on-year driven mainly by a 11% decrease in Europe.For the group, the first quarter adjusted net income was $1.8 billion compared to $2.8 billion in the same quarter last year. And as already explained, this reflects the impact of lower prices, lower refining margins and lower demand. The group debt-adjusted cash flow was $4.5 billion compared to $6.4 billion in the same quarter last year. This $2 billion decrease was driven mainly, once again, by the drop in oil and gas prices, more or less $1.5 billion effects, and a decrease in Downstream cash flow for an effect of $0.6 billion. In addition, dividends from equity affiliates were lower year-on-year due to the environment and timing effects. Let's move to investments. So net investments during the first quarter were at $3.7 billion: organic CapEx at $2.5 billion, down 12% compared to the first quarter 2019; and net acquisition were $1.2 billion in the first quarter, so $1.6 billion of acquisition mainly for Adani Gas Limited in India and the second tranche on Arctic LNG 2 in Russia and asset sales for $0.5 billion, mainly the Block CA1 in Brunei that we sell to Shell and interest in the Fos Cavaou regas terminal in France. Since the start of 2019, we sold $2.5 billion of assets and we announced a further $0.7 billion which are still to be closed. But given the less favorable context of asset sales, particularly for Upstream assets, we are refocusing the asset sales program to infrastructure and real estates. The balance sheet remains strong, with 21% gearing at the end of the first quarter. Gearing was negatively impacted by the working capital build in the first quarter of $2.7 billion. This working capital build is mainly due to seasonal or temporary effects, and I will give you 3 elements that contributed to this working capital build during the first quarter.So first, our gas and electricity B2C business generates more receivables from our customers in wintertime when consumption is higher. The second element of this explanation is directly linked to the environments. The tax liability of our subsidiaries, particularly in Marketing & Services segments, were reduced in Q1. And on top of that, we have our trading entities that -- who are building the stocks to benefit from the contango in the markets to prepare for the future, and we hope that, of course, that it will be translated in additional results in the future.Having said that, as the working capital is a critical element for the group's cash, we have put together an action plan focusing on working capital release, and we made the decision, by the way, to incentivize our manager on their performance regarding the working capital. By year-end, in a $30 per barrel environment, we anticipate a $1 billion working capital release.Let's move to our net liquidity. So this net liquidity at the end of the first quarter was $21 billion. So it is $9.5 billion of net treasury, so I mean the cash minus the debt that has a maturity less than 12 months, plus $11 billion of undrawn credit lines. And in April, we reinforced this liquidity by adding $10 billion of additional funds. So we issued more than $3 billion of long-term bonds on the market at competitive terms, and we drew $6 billion out of newly negotiated credit lines.So summarizing the first quarter results, our business segments were resilient in a weaker environment. And the strong balance sheet, the low cash flow breakeven put us in a favorable position to cope with the challenges ahead. And I leave the floor to Patrick to describe the way forward.

[Patrick Pouyanné, Chairman, CEO & President]

Okay. Thank you, JP2. We're good, like the results which were quite resilient in this difficult environment. But the Q1 results, I'll be clear, may be the best of the year. We don't know where we go, but I can anticipate that the Q2 results would be much lower because, in fact, in Q1, when we look to the impact of the COVID-19, it was mainly for business in China and M&S during the first 2 months. And I would say, since 6th of March for the rest of the group, so it's more or less 1 month, I would say, which has been really impacted, plus some inventories effect by the end of the quarter, but I think Q2 will be more complex.And it's why, by the way, we made something today -- I will make something today, which is quite unusual, which is to give you more guidance about how we can see the year. To be honest, it's not a very good -- easy exercise because these extraordinary circumstances are characterized with a lot of uncertainty. And the way we can -- the economy can exit, European economy, U.S. economy will exit from this special period of confining, will it be as quick as in China or not? A lot of question marks. But I think it was good to give you more guidance and to correct a certain number of anticipation compared to what we told you in February. So first, I will show you a few slides. The first slide is, of course, to tell you what we are facing, with all the teams of the group around the world, this COVID-19 challenge and priority being, of course, the health of our people and, again, the continuity of all our operations in safe -- in a safe way. So a lot of people and also our employees are working from home, and it works. I would say the IT systems of the group are also resilient. We can have more than 20,000 people working same time from distance. It's working well. We have also, of course, reorganized all the operations on the ground with more rotating teams in order to be sure that they don't cross each other. We have taken some measures in terms of protective equipment. Masks are mandatory in the company. You cannot enter into any site of Total without having -- if you have a temperature which is abnormal, and we take the temperature of everybody coming. So -- and of course, we dispatch the company sanitizer gel. And we reorganized -- we are, by the way, today, in France reorganizing all the offices and all the sites in order to be able to keep the social distance between the people, which is, I would say, what is required by the health authorities. So this is, of course, obliging us to find new ways to work, but it seems to work. And thanks to the efforts of everybody. Our operations, we have implemented some business continuity plan, which means that we have, in our subsidiaries, limited staff to what is essential people, looking to what we can ensure, again, all the productions on the sites and the access -- maximizing the availability. We control, of course, strictly the access to the sites on all the offshore platform. There are some -- if we think there is a risk of PCR testing, we put the people in quarantine before they go offshore. So actions have been done in order to ensure that continuity. Customers is also important. Our retail network is open at 95%, which is quite high. Unfortunately, to be honest, when we look to the statistics, the business is not at that level. In France, we have lost almost 70% of the business in marketing. In Germany, it's around 35%, 40%. But our people are there, and we have reorganized that to keep the social distancing. We continue to supply gas and electricity. And we take care, of course, of our communities as much as we can. So we are providing some masks in some of our countries. When we acquire some of our masks, we give some of the masks we acquired to our communities. We have put in place some special program, in particular in France, but in other countries as well in order to provide free gasoline to some health care professionals. It's a stronger move in France. 1.2 million people -- healthcare professionals have received cards containing EUR 30 of gasoline, and they appreciate a lot. So it's strong. It's good to demonstrate, I would say, the solidarity which will support in these difficult times. It's a value of the company, and we have to demonstrate it with our communities around us. So that's the COVID-19. Again, everybody is onboard, and we are on the first line of this war. Then, of course, following slide, the oil market. This is a crisis we face. I will not make you a lot of lessons. You read everything. What I would just say is that, of course, you know that we are facing a clear overproduction. We have really, in our industry, a difficulty to adapt our production capacities and our production levels to the demand. We have even done the contrary during one month, growing your supply instead of lowering it. I think we'll -- thank God the various producing countries become -- have seen the dramatic effect on the oil price, and they have decided to take actions by putting in place some quota and not only the OPEC+ country with almost 10 million, but other countries are joining the group, including, by the way, a country like Canada. We will come back on the Total case. Obviously, today, it makes little sense to produce oil when you have a negative margin and variable cost. And so -- but the industry is facing this situation. Of course, I met a journalist this morning who was telling me compared to '15, I told him it's much more an unprecedented situation because in '15, we're facing inventories growing from 58 days to 70 days. Today, we have jumped to 90 days. And this is -- of course, the most difficult part for all of us is that not only we could face a shortage of inventories, but more fundamentally, that means that it will take time before -- to be able to decrease these inventories, which means -- and by the way, I was -- in the announcement by the OPEC+ countries on April 10, what was interesting was not only the quota of 10 million barrel of oil per day immediately, but it was a fact that they have put to maintain quotas until the end of 2021, 6 million barrel of oil per day. And of course, this is the fact that we face really. Without inventories, we will put pressure on the price. Again, difficult to anticipate, but this is a new -- old feeling we have, which is why, again, we took very seriously the situation. And March 21, we presented to you and we communicated immediately a first action plan that we need to reinforce today. Next slide. So on the next slide, back to fundamentals, which will you -- I want to remind you because it's very important. Each company is entering into this crisis with different, I would say, fundamentals. Ours today are much better to weather the storm than the ones which we are facing in 2014, low gearing, excluding lease, around 17%; and more fundamentally, a cash breakeven which is under $25, around $22, $23 per barrel. And the action plan we will put in place will lower this breakeven. So these 2 fundamentals on which I was insisting as being, earlier, at the core of the strategy of the company are giving us today competitive advantage. And it's time, of course, to use this advantage compared to our competitors. I would also say that, like you see at this table, that our CapEx today, our organic CapEx are half of the ones which were there. We have also some lessons learned, which was to keep some flexibility, flexibility in our CapEx and what we will propose to you -- present you is if we can quickly decide to cut the organic CapEx, it's because, again, in our organic CapEx, part of that, we are flexible, and it's around $3 billion. But we can activate quickly, and we can activate them because we have the contracts designed to be able to activate, so we can stop some rig; contracts in order to stop to make infill wells in Angola or elsewhere in the world. So this was the lessons learned from 2014, '15, which have been implemented in the company in a disciplined way that we can leverage today.But the crisis is there, and the chart on the left -- on the right on the slide demonstrate that it's even -- it's quite a big gap in terms of cash in March. When we made our first action plan, we evaluated the pure price impact. We have taken an assumption. It can be wrong, of course, but the average of the coming 9 months is $30 per barrel. So we took the first quarter which was around, I think, $50 plus, of course, the 3 coming quarter at $30. So it's an average of $35 per barrel. In March, we only evaluated the price impact with our metrics, I would say, the sensitivity. So it was around $9 billion, taking into account the lower refining margin, gas price. So we gave that figure to make a plan. What we have done since after these action plans, we have asked the teams to rebase their budget. So there was an intense work to be done everywhere in the company. I must thank all our teams for this hard work. But the idea was, of course, for them, one is to absorb the cost action plans on OpEx and CapEx to confirm our first plan and to put it in their figure so that it's shared and accountable of it, but also to better evaluate the impact of the crisis on, I would say, the activity, on the production on one side, on the refining on the other side and the marketing and sales. So -- and this came -- they came back to us. And today, with the assumption we took, we evaluate the cash gap not of $9 billion, but around $12 billion. It's why we need to reinforce our action plan today.So next slide. So in terms of production, you had a guidance in February that we could raise our production by 2% to 4%. The 2% -- between 2% and 4%, I remind you that it was linked to the closing of the Anadarko assets. Today, we are reevaluating all these guidances on production. We said 2.95 million to 3 million barrel of oil per day. It will depend, of course, on the way that the OPEC countries will implement with discipline their quota. And to be clear, the policy of Total, my instruction in the group is we apply the quota everywhere it's required by the country. It's our interest honestly. And of course, we have some countries where it will hit Total like Abu Dhabi, Iraq, Nigeria, Angola, Kazakhstan, less -- not so many, in fact, when you look at the list. So we have the quota of OPEC+. We'll have -- we are voluntary reducing our production in Canada together with our operators on -- dividing more or less by 2, even more on one of the field. But I think that's part of the contribution.We had also an effect which was, by the way, taken into account in the Q1 production already: the Libya conflict where we have 2 field, El Sharara and the Waha, which are closed down, shutdown only the offshore production is producing; and some impact on some gas local demand that we can see because of the COVID-19 as well. So we give that guidance of 2.95 million to 3 million. Honestly, if all the quotas are really well implemented, it should be next to 2.95 million rather than 3 million. But it's difficult to understand all what will happen during the coming 9 months. Second slide in terms of impact of activity, the Downstream. So there again, clearly, we have an impact of the lower demand. But true that all refineries had some, I would say, issue -- availability issues during the first quarter, like Normandy, what was mentioned by Jean-Pierre, was lost because of fire at the end of last year. We had some -- also some turnaround in some of our plants. But today, in fact, our refineries are running in Europe, what I would say, around 60%, more or less. And we have some of the refineries like Grandpuits which was going out of the turnaround. We decided not to restart it for the time being, like Feyzin as well.And so when we look to -- of course, the demand will come back when people within the business, the economy will wake up again after this, I don't know, we say confining. Maybe people today closed in the -- they cannot really work. So the demand will come back. We'll see it, we expect. But what we anticipate is the utilization rate of our refinery rather around 70%, 72%, 75% compared to what we had done last year around 85%. So it's a decrease of, I would say, around 15% of utilization rates, which, of course, will impact the cash flow from refining. On the contrary, on petrochemicals, we have clearly better news, I would say. It's more resilient business for 2 reasons. One, in fact, the demand is not so impacted. Demand for plastics for food and for hygiene are quite strong today, for obvious reasons. And also petrochemicals, we have some flexible crackers, and we benefit in that business from, I would say, low-cost naphtha or low-cost ethane. So we have the capacity to have a certain resilience and the results so far are good. So that's a good news, which would compensate, but not fully because the size of business is not the same, but that's a good element. On the Marketing & Services, clearly, we are suffering hardly today during the second quarter, in particular in Europe. M&S is mainly around for retail network around Europe and Africa. And in Europe, we observed -- I would say, we think around the demand decreased by 50% as our fixed costs on variable cash margins is around 50%. That means that if you lose 50% of your revenues, you have no cash flow out of this business during the quarter. So that's why we have an impact, more or less, we evaluate, of around $600 million.So all in all, when we look at it, the guidance we give you for the Downstream cash flow for the year is around $5 billion to $6 billion. I remind you in February, it was $6.5 billion, I think we gave you, $6 billion to $7 billion. So at this point it's $1 billion of difference. We'll see. Maybe we are a little pessimistic with the $5 billion, but it's difficult to anticipate. And I think it's good to give you such a better vision of where we go for the next -- for the rest of the year. So there. So that means that we have to put -- to upgrade, I would say -- to update and to upgrade the response to the environment.In Total, we strongly believe it's a philosophy that we have to help ourselves, so we have to take actions by ourselves. Maybe you have noticed that I was one of the first CEO in France to say that we will not ask anything -- any help from the state, not one. I think it's good to have this self-help to keep our independence and to be able to -- because the company is strong enough, the fundamental is good, and we know that we can have some resilience internally.So on the capital side, the reduction we announced, $3 billion in March. Today, we are increasing this capital savings by $1 billion additional. Of course, we have activated there again on the organic CapEx and the -- so more than $3 billion, I would say, or what was flexible CapEx. We have also stopped some, few feed projects, which are not -- maybe less priority today. I would also say that -- and I will come back on it, but Occidental officially told us that we cannot acquire the Algerian assets. So -- but, of course, it is part of the acquisition budget. Of course, on the same time, maybe we are prudent. So Algeria was around $2 billion. We released today only $1 billion because we also know that, I would say, the divestment budget is much more complex to execute. It makes no sense to me and so -- to try to sell an asset like Bonga in Nigeria. It was public when we tried -- when we put on sale. We stopped the sale because we don't want to lose value on the Upstream assets -- an Upstream asset of high quality like this one. So we are replacing it, we've overwrite but it could take time to execute it. So $1 billion additional is coming from, I would say, fundamentally the M&A -- the net investment budget -- the net M&A budget -- net acquisition budget. But at the same time, again, I repeat it, and it's linked to my second part, we maintain our low-carbon electricity investments at $1.5 billion to $2 billion. On the OpEx savings, we announced $800 million. We -- difficult to increase it a lot, but together with the bottom-up approach coming from the teams, we have set a new target to $1 billion. And to be clear, I announced this morning that I have proposed to the Board to reduce my salary by 25%. And the Executive Committee has decided to follow this effort with me with 10% until the end of the year. I think it's -- for us, it's a message of exemplarity within the company. We are asking big efforts to everybody. Again, we don't want to release it to -- no idea to decrease the workforce. We have freezed the recruitment, which means reduced a lot, to be honest. We'll more or less recruit in 2020 the level of people that we recruited in 2015, 2016. So we are back to these tough years, but we have -- we prefer to -- we trust the people who are today in the company to execute all these saving programs, and we show some exemplarity by applying this decision on ourselves. You can see on the slide that the Refining & Chemical will benefit from $1 billion of energy savings, which will be, in fact, good for their margin, which is not so high because of the demand, but it will help the Refining & Chemical -- or refining business to face the situation. So we don't add this $1 billion as a clear saving because it's part for me of the refining margin -- of the assumption of refining margin. And then we have shareholder return because, again, we have to help by ourselves, but we are also to ask to our shareholders some efforts. So we are planning at $60 per barrel, like we announced in February, a cash shareholder return of around $9.5 billion, $7.5 billion plus $2 billion, more or less. You know that we have decided immediately to stop the buyback in March. We have -- and I will come back on the share return -- or shareholder return mindset of the Board at the end of my presentation. So I will not describe it now, but the message that we have proposed, a limited, a one-shot scrip option, and I will come back on it, on the last quarter of the 2019 final dividend. But at the end, the result is that we will give back to our shareholders -- return $7 billion instead of $9.5 billion, $7 billion. If you take Slide #4, you will see that the cash flow from operation is around $15 billion. So it makes around 45%. So it's not too bad. So that means that we place a lot -- that we attach value to shareholder return despite these difficult circumstances. I will come to the next slide. This one, I will not comment it long. It's the same slide we used in '15, '16. The 4 keywords which are the mottos of the company: HSE, delivery, cost and cash, be excellent on what we control. Everybody, I think, around the company is motivated. H because of health, COVID. S because of safety, because, of course, that's a fundamental. It's been more fundamental with -- when difficulties are there, not to have any accident. And E -- and I will come back and say, the other part is CO2, and everybody mobilized on this challenge as well. Delivery because it's the only way to generate cash flow, so increasing the availability, the use of assets. The costs, I've already explained. And the cash, no need to say that it's the art of the war, the blood of the company. And like -- because the cash is the blood of the company, yes, we have decided to clearly reward the people and our top executives on their capacity to release this $1 billion of working capital because it's also part of what we must manage in the company.So to summarize this next slide, the 2020 action plan, 4 -- 5 key figures today: cash preservation, $7.5 billion of cash savings, plus $1 billion of working capital release; guidance -- production guidance, 2.95 million to 3 million; Downstream CFFO, $5 billion to $6 billion; and liquidity, which is obviously very important to what Jean-Pierre explained to you. I think it's key. We have increased it. We have taken actions as well. We never know where the financial systems would go so we prefer to have some cash in our pockets, in our treasury rather than outside. So net -- I think it's net liquidity, which means it's a gross treasury plus undrawn credit facilities minus a short-term debt under 12 months of $25 billion. And we know -- you know that we attach some value to maintaining our grade A credit rating, which we are -- where we are today. I would like, before to give the floor to Q&A, to make some comments, next slide, on what are the mindsets and the discussion at the Board level on the shareholder return. I'm sure that it's clearly a debate that has been put on the public domain by one of our colleagues. And I read a lot of papers during the weekend, interesting papers. I would say the way we look at it, we discussed it. First, of course, the first responsibility of the Board is to preserve the future of the company, and that's important. But at the same time, the Board has strong trust in the fundamentals of the company. And I think if today, we have -- the investment case in Total is offering 2 major differences compared to some of our competitors, which are this low breakeven, under $25 and the low gearing, under 20%. That means that we can use our balance sheet to weather the storm and towards the shareholder return. And really, the discussion of the Board is what we are conveying, but it's a good time to show the difference and to use our competitive advantage to demonstrate why the investment case in Total is superior to those offered by some competitors. The second element of the debate was, yes, at the same time, unprecedented market condition, extraordinary circumstances, so what is the level of cautiousness, but also no overreaction. And the feeling at the Board, yes, we have a lack of visibility, but we should not make immature decision and overreact. Let's wait. We can resist. We are ready. So we have some resiliency. Let's see better visibility, maybe not Q2, by the way. I think it's better by Q3 because at Q3, we will see the U.S. economy, European economy, the speed to recovery to more normal level. We'll have also better ideas of the way that the OPEC+ countries are really implementing the discipline of implementation of the quota, so a bit of visibility as well on the oil market. So we think that it's -- we have, again, the balance sheet to resist. So no overreaction on our side.And I'll also say that in the timing issue discussion, it was clear to us, but yes, we can be very quick in Total to make some M&A deals.But when it comes to shareholders, it's better to think twice, and we value the long-term relationship. It's a matter of trust. We build trust with time, and we know we can destroy it quickly. So I would say that's the point.So on cautiousness, of course, there is a dose of a certain cautiousness as well. Stopping the buyback, I think, was obvious. You have observed that we have decided that -- to offer this scrip option for only -- and it's a one shot of scrip option, so 2019 dividend, final dividend through the AGM. You can see that. So it's, again, $1 billion of cash savings. We have, by the way, bought more than $500 million in the first quarter. So it's the balance there, more or less.Having said that, what is important is that what the Board has decided as well was not in the resolution, which means that we have rejected the idea to offer the scrip dividend for the full year 2020 because we don't have any resolution. And in the French legal system, the AGM has to decide a scrip dividend. So on the AGM of May 29, only the scrip dividend for the final quarter will be offered, but not for the rest of the year, again, because we have the fundamentals and we are ready, and the Board is clear what we can use this balance sheet -- to leverage the balance sheet.I also will say with the same idea, but in fact, when we look to the size of the dividend of Total, around EUR 7 billion, EUR 7.5 billion depends on -- it's euro so it depends on the exchange rate, between EUR 7 billion and EUR 8 billion. When we make our tests, about $40 per barrel, there is no problem. We can finance our investments, we can pay the dividend. And so we are comfortable. And again, balance sheet is healthy to weather the storm.At the same time, that's true, but I have read some papers, interesting papers from some of you that there is an opening debate in our industry. We all have, I would say, a progressive dividend policy during several years. Today, there are some voices about should we switch to more valuable dividend linked to payout policy like some mining companies. I think this is some dialogue we cannot have -- which we need to share with our shareholders. Again, it's important to have their input. And in the same way that we have engaged with our shareholders about the climate policy, I think it's even more important to engage with them at such a topic and to share it. So that's the mindset of the company, of the Board and it's why so strong confidence in the fundamentals of the company. We have -- we prefer to wait and to have a better visibility of the macro environment, on the oil market and to engage and to have the inputs of investors because if we have to face a longer crisis, if the price remain at $30 per barrel or under for long, obviously, we'll have to take actions, and that has to be shared with our shareholders.So I've been a little long on this one, but I think now we can enter on the Q&A.

[Patrick Pouyanné, Chairman, CEO & President]

Okay. Maybe I should move to the second part of the presentation, which is on climate. Again, if some of you wants to ask a question on the first part, I will be able to take them, but I think it's good to have -- to jump a little more to the, I would say, medium and longer term and to give you some flavor of what we have announced today. I think in Total, sometimes we believe more in values of doing but not speaking. We are not so good in advertising and speaking. And that's true that we have spent -- we are -- we have a strategy that we execute. When I observe what we have done since 2015, we are, by far, among the major companies in terms of reduction of our net carbon footprint, the best ones. We have reduced on this carbon intensity by 6%. None of our peers have done so well, far from them. I mean we are really in action. And at the same time, because we are pragmatic, we don't like to put objectives which are too much aspirational. We are people maybe -- a group of engineers, we like to be able to see what is the way to achieve the objective of the ambition we put on the table. It's why we had until now 2 years ago, and we were ahead of the pack, an objective to 2030 of 15% of reduction, an ambition of 40% -- 25%, 40% by 2040. And it was also clear to us when -- in September last year the new message from the scientist that the world should be neutral by 2050, but we have to also to ask ourselves some questions. So we put some -- we have worked together with the Board of Directors. We have also, as important, decided -- because of the road shows in February, we have met investors more, to be honest, in Europe than in the U.S., which were willing to engage with us about this topic, what is your climate ambition. So we have decided with the support of the Board to engage in that dialogue with some representatives or some investors which are participating to the Climate Action 100+ in a positive way. But of course, all that was -- the dialogue was fed, I would say, by all what we have prepared in the company and with the Board. And the idea is that, yes, we share fundamentally the ambition to become carbon neutral by 2050 together with society. And I will come back on all the words of the statement. And so -- because also we observed in all the -- our talks with our shareholders, investors, that more and more the ESG movement are gaining credit. And so we don't want to suddenly become a laggard from, I would say, investors' point of view, while at the same time, in terms of investments and transactions, we are leading the pack. So there was a sort of disconnect, which was -- we say, okay, we need to express this ambition. And in the thinking of the Board, I want also to say that we see clearly 2 different package, right, in what we call the Scope 1 and 2. Scope 1 and 2, you all know that now, is all what is under our control. These are the emissions of our own operations. And clearly, on this one, there is no doubt for us that we should go to carbon neutrality. We are responsible when we produce, when we refine, when we transport, of these emissions. This represents 45 million tonnes more or less today. Going to carbon neutrality, which means that on one side, we'll work on the technology to reduce our emissions, mobilizing our teams, and the net carbon neutrality, which means as well that we can use some, I would say, carbon sinks in order to get to the neutrality. So that, for us, was clear since -- I would say, last 6 months, it was clear that this was the easy part of it. Then we had a debate about the Scope 3, which is the global, I would say, ambition where, obviously, we -- as you know, we are not the only responsible of these emissions because we sell products -- energy products to customers. They are used by our customers. We don't sell a plane. We don't sell a car. We don't transform -- we don't product cement. At the end, we are not the experts in -- or should we design the engine of a plane, all sorts of platform, to be honest. And we don't know if they should use petrol oil or gas or hydrogen or I don't know which other energy means. But what is clear as well is that this is on the table. So that means that Total, which has an expertise in this -- all this energy business, should work and must be proactive in helping the world to, I would say, adapt to this demand frame for energy. So we said to ourself, okay, we need to be able to express this ambition on the Scope 3. It's not -- we are not alone. We'll not do it alone because if we express -- we say to ourself we'll be carbon neutral on Scope 3, that means that, clearly, I'm just telling you I will quit this old business because I have no way to do it. And this is not the mission we have. We think that we have to deliver energy to the world. And at the same time, when we observed -- we were thinking about it, we observed that there is one region of the world, which is Europe, which is, I would say, at the forefront in terms of societal willingness to go to carbon neutrality. Society in Europe is willing to do it. So governments in Europe are expressing it through real moral and ambition, objectives. They want to put policies. They want to put incentives. They want to put regulations even in some countries. And so for Total Europe, it's very important because it's 60% of our sales today, and 60% of our Scope 3 emissions, around 280 million tonnes of our emissions, are in Europe. And so fundamentally, we say to ourselves, okay, on Europe, we -- by the way, we'll propose to our shareholders to become a European company by statute on our next general assembly. We have to be proactive, and there is no way for us if Europe -- to Europe, we can be carbon neutral. That means that the -- there will not be many thermal vehicles in 2050 in Europe. So we have to adapt ourselves and to be proactive. And so carbon neutrality in Europe, we can take this commitment on Scope 3. So that's a big step towards European Continent. And so that's the pieces that we put on the table. And then for the rest of the world and the global Scope 3 ambition, we consider that today it's premature. It's premature because Europe, yes, has expressed their willingness to be like that, but some of the parts of the world are not there. They maybe take more time. We open -- let me be clear that Europe will be, I would say, the light of the world, and more regions will join the same policies and regulation and make same policies. And then Total will commit to do it on this vision as well. But on the global world, we said the best way to express our ambition is through these net carbon intensity indicator. And what we propose today is to decrease it by 60%, and I will come back on it. So that's really a comprehensive framework with some 3 clear steps to go to carbon neutrality. We really share the ambition to get to net 0 by 2050, but in step of society. We'll not do that alone, and we'll not do it against the society because, to be honest, I could get rid of my oil suddenly, but I will sell it and somebody else will produce the oil. So it will not help the climate -- the global climate if Total just decides to leave this business. So it's not at all what we think we should do. We have some expertise. We think we can be one of the prominent player of this new energy world, and this is what we want to do. So just to -- it's a little long introduction, but I think I said the theme in the way that we had the mindset of the management. It took us some time, yes. But now we are clear of what we put on the table together with, again, investors. And this dialogue was very valuable to us. Just next slide, I will be quicker. So -- and just to remind you -- and if we take that commitment on the new climate policy, it's because it's sustained by the strategy. And the strategy, I repeat, is to become a broad energy company, a multi-energy company. Quite clear that we -- through this -- what we expressed today, we say, yes, it will take time, but we will grow, and I will clarify the timing of this strategy. And we'll do it because there is an evolution of the market -- energy market. You all know that. I will not repeat it. Natural gas, low-carbon electricity will become predominant. All petroleum products will diminish in the carbon mix, and we'll need some carbon sinks. And we do it because we believe this low-carbon strategy is giving a competitive advantage for long-term shareholder value. That's, I would say, the key message. So the ambition is sustained by the strategy. If I may go to the next slide. So it's just what I just expressed during my introductions. It's a summary of what we are committing. And what we express today are the ambition getting to net 0. So yes, we share the ambition to get to net 0 by 2050 together with society for our global business. And we take 3 major steps today: net 0 on our operation, Scope 1 and 2; net 0 on all our activities, Scope 1, 2, 3 in Europe by 2050 or sooner; and globally, a net carbon intensity reduction by 60% by 2050, 60% or more. We have initially expressed it in a strange factor, in absolute value, 27.5 gram of CO2 per megajoule, which, by the way, if you compare to our peers is the lowest absolute value which has been put on the table by 2050. So next slide. We also -- in this paper, it's a compressive approach. It's not just about metrics and 2050. It's also -- of course, it will impact our capital allocation to be consistent with this ambition. And in particular, in the company, today, we are using $40 per tonne of CO2 pricing in all the investments. And we also ask our teams to test all this CapEx with $100 per tonne from 2030, which will raise the ambition and which will, of course, direct part of the capital allocation. And as I had mentioned before, we will reach 20% of CapEx in low-carbon electricity by 2030 or sooner. We also made annual review of progress, and we are engaged with all the professional organization on this climate policy. That what's already, I would say, done by Total. Next slide. So these are slides which are just illustrating the 3 steps that we are taking today. So I will not be very long. The Scope 1 and 2, of course, this net carbon neutrality will be -- there will be still some emission because in 2050 -- I will come back on it -- we'll continue to produce gas, to produce oil. And so there'll be some emissions. We will reduce it through technology because, for example, we'll electrify part of our process. We are lowering -- or we are decreasing all these emissions. I will come back on it. And we'll need also some carbon sinks, and we think that more or less, it will be -- the emissions will be on the high side, around 20 million to 30 million tonnes. And thinking that we can develop carbon sinks of 20 million, 30 million tonnes at the horizon of 2050 is perfectly achievable. So this I would say, target, objective is clear, and I think this will be -- we just want to reach. The next one on Europe. So you understand the logic. We are actively supporting the ambition. By the way, all Europe, it's not only EU, it's Europe, which is extended. Sorry for British colleagues. But it's EU plus U.K. plus Norway because, obviously, if we take -- commented in Europe, we have to include the North Sea. Otherwise, it would mean something a little bit tricky. So we include the whole. We think by 2050 production in North Sea should be very -- that they'd be very strong, to be honest, most of the decline of this area. We think by 2050, again, that the policies will be put in place. We observe already that some countries have taken legislations to eliminate any thermal vehicles. So that means that -- and we have to take it seriously because, of course, it will influence our business. So we have time, but we'll have to adapt. 30 years is long. So this represents a decrease of 280 million tonnes of CO2. So it's a very strong commitment. And third one, I will not comment my net carbon intensity. It's just for reference. Honestly, our definition is very near from the one from a Dutch colleague, I would say. By the way, we are working together to align -- and I think it's a strong message I know from them. I'm repeating the message. I think it's very -- it would be very good if the industry could, I would say, use the same metrics on this type of net carbon intensity. So we have aligned the way we calculate so we have very limited difference, and we are making the work together. And I would call that it would be good that everybody do the same. So I will not comment it, but this one is more important. So -- but it's more important because it's not only we have raised the ambition in terms of decrease, we have -- so put an ambition of 2050 of 60% or more. We put some intermittent steps. The 15% of 2030 is there. We have realized 6% in 5 years. We put an [ in-between ] step in 2040 of 35% in order to be consistent. And again, the absolute value of 27.5 gram of CO2 is today the lowest absolute target. But I would like to illustrate that more. What does that mean in terms of business for Total? What is -- no, let's keep it. In fact, what is the mix of supply, what Total could provide by that horizon? Just to give you a flavor of what the company could become. And this is why we took this -- it took us some time because we wanted to understand if, when we put this type of ambition on the table, we can really achieve that, and it was the idea that, of course, it's some serious matter. In 2015, Total on Scope 3, the sales of Total were 66%, 2/3 oil, petroleum products; 1/3 of gas, 2015; and less than 1% of electricity, nothing. In 2019, the mix of the sales of the Total, 55% of oil, 40% of gas and 5% of electrons. So in 5 years, we have already introduced this 5%. Half of them are coming from renewables, half from them from gas-fired power plant. And thanks to this evolution, but it's an evolution, we have managed to decrease by 6%. If we want to -- in 2030, the 15%, what does that mean? That means 45% of oil, 40% of gas, 15% of electrons. And this is achievable. We have done 5% without suddenly accelerating -- to come back to Christyan's question, to be obliged to rush so suddenly. We can go steadily around this pathway. And that means that we should do in the next 10 years at the same pace what we have done in the last 5 years. As we have more experience, more teams, more ideas, we better understand, I'm convinced we can do it. And by 2050, if I try to describe to you what does it mean to a company like Total which would decrease by 60% or more worldwide its carbon intensity, we should still sell 20% of oil. But out of the 20%, not the same oil, 1/4 of that should be biofuels. So that means it's a different product. It's -- I would say 15% of oil, 5% of biofuel, but liquids represent 20%. The gas is still 40%. But there again, the gas should be around 80% natural gas and 20% green gas, either hydrogen or biogas. So that means -- and this is achievable at that horizon. And then the last 40% should come from electrons. And to be neutral, to reach it, we also take into account some carbon sinks because it's part of the business model. And this is compatible with around 50 to 100 -- that's more uncertain as technology has to be developed, but let's say, between 50 million and 100 million tonnes of carbon sink. 50 million tonnes, I think, is achievable, 100 will be more challenging. But the type I wanted to describe beyond what is written there in terms of decline, what could be -- and honestly, in terms of business model, what does that mean? That means that, clearly, Total will remain -- again, we continue to produce oil. We continue to produce gas. We'll produce more biofuels. We produce more green gas. And yes, we'll invest steadily in some electrons coming mainly -- by the way, 40%, obviously, in 2050, this should come mainly from renewables. So that's the evolution, but it takes time. And again, in 2030, what I just said, we are still 85% hydrocarbon and 15% electrons. So -- and that's important from this perspective. So we can put -- we can offer this ambition today because it's linked to something which seems to be realistic and which we can put -- allocate capital year after year without disturbing, honestly, the capacity of Total to deliver value from this area of expertise in hydrocarbon but also by preparing the future. The next slide is just -- again, I will not comment. We show it in February. I told you that Scope 3 required from us to act on products, which is exactly what I expressed with biofuels and green gas; to act on demand. Yes, we need to work with our customer. We cannot do it alone. We need to work, and we have engaged with plane manufacturers, more or less -- by the way, more, I would say the companies who are designing the engine of planes, which are more interesting to work with them, to see if we could really help this use of energy to change. But we can also take actions on the demand, on our emissions. And today, I want to confirm to you 2 news which were not in the press release, but we have decided to influence the demand, but we will not sell any more fuel oil to power generation in the world -- worldwide from 2025. So we'll give 5 years to our customers to find alternative solutions. And we think it's feasible when we look to what we've done, what we have in our portfolio. And on the gas, you know that gas, there is an emission, always this debate about methane. When we look to really our operations, and in particular, on the gas fields because it's key to produce gas, we can observe that we can commit to lower our emissions for methane emission from the gas fields less than 0.1%, which is a minimum. And so we -- it's another target that we put in our road map, and we'll come back on this to giving more flavors in the coming months on these 2 commitments. So next, last slide I think is a conclusion of my introduction, repeating our ambition. And again, keep in mind that it's clearly a link between the carbon -- the strategy of the company and the way we want to establish and to become this broad energy company, producing and selling petroleum products, gases and electrons in order to be able to fulfill our mission, which is to deliver affordable and reliable energy to our customers around the world. So now I'm ready to take some questions either -- on the climate mainly but also if some have some requests on the first part.

[Operator]

[Operator Instructions] And your first question comes from the line of Michele Della Vigna of Goldman Sachs.

[Michele Della Vigna, Co]

And congratulations on the resilient results in such a difficult environment. I had 2 questions, if I may. The first one is about LNG. We are seeing a clear divergence between LNG prices and Henry Hub, which are leading to negative margins, at least this summer. I was wondering if some of these movements perhaps have made you more wary in terms of increasing the exposure to U.S. LNG and have made other projects like the one you're developing in Mozambique actually more resilient and less risky from a basis perspective?And then the second question I wanted to ask you is if possible to break down organic versus inorganic in the $14 billion budget. And to clarify on the Occidental Africa acquisition, if effectively the second part of the transaction with Algeria and Ghana have been canceled or just delayed at this point in time.

[Patrick Pouyanné, Chairman, CEO & President]

Okay. Thank you, Michele, for your questions. Always very interesting and challenging. I would take the first one on LNG first. You have noticed that our LNG activity has been quite resilient. By the way, second quarter from this perspective will be -- should be quite resilient as well, because in fact, on a long-term price, we have a sort of 6 months of delay between the oil price and the LNG formula. So it's the second half of the year which would see more impact on the lower oil price. It is clear that, yes, we face today -- people speak a lot about the oil market, but the gas markets are suffering a lot, it was already because -- since last year. So we have an exposure to the Henry Hub, that's clear. We will, by the way, probably -- we are on the way to, I would say, cancel some of the LNG tankers during summertime in order to limit some losses.It's true that we have -- on our side, I would say, we have projects. We are working still on one project, the ECA project in Mexico, because it's on the Pacific Coast. And together with Sempra, we see a lot of value. You save more than $1 per million Btu of just the trip to Asia. So this one is not a big project. So this one, I think -- and I think we are aligned with Sempra and Mitsui. We should move forward in coming months. Other projects, the answer is no. I mean I'll be clear, we are not in a -- I mean I'm not very -- we are not -- today, the priority is not to invest more in merchant projects in the U.S. So clearly, we have the expansion of Cameron. We'll see with Sempra where we go. And the greenfield project, like the option we have with Tellurian, I think there is no reason it would be sensible to move forward on this one. And that's true as well, like you said. From this perspective, the acquisition of the Mozambique LNG project is quite -- was a different nature. We always explained that it was a project which was developed by Anadarko, I would say, in the old way with long-term contracts linked, most of them, to oil prices. To -- and so that's what's the big interest for us on the Mozambique, not only the size of the resource, which gives space for many development, but also the quality, I would say, of the portfolio of buyers. And so that's one-off thing. So that's true that we have -- I already said, I think, in February, we have a lot of LNG in our portfolio. We have enough projects. It's not time to add on it maybe the excess of ECA. The status of OXY and maybe I will -- as I told you on -- no, nothing is canceled, to be clear. There is an SPA, which is valid, and the long stop date is 1 year after the Mozambique closing, which means end of September 2020. And the -- everything is public because it's -- all that has been disclosed to the SEC. So you can find all the contracts. But the Algerian sale, OXY notified that they cannot deliver towards the Algeria asset. They will -- because of the position of Algerian authorities. We want to keep -- we want, in fact, fundamentally to keep the operator as it is today. So OXY will remain as an operator. And so they did not approve, in fact, the change of control of Anadarko to OXY -- they approved it, but just to -- under the condition not to sell it. So that means Algeria will not be done unless OXY finds a way to come back to us according to the contract.And on the Ghana, it's -- things are moving on. And again, I will not elaborate more on it because it's -- we have a contract with OXY. And so we are -- it's between the 2 companies that we have to decide the way forward. So organic versus M&A, I would say, in the $14 billion, I'm not sure to have a figure, it's probably something like $10 billion to $11 billion and $3 billion to $4 billion, $3 billion to $4 billion. Yes, $11 billion and $3 billion -- or $10.5 billion -- I don't have exactly the figure, but just to give you some range.

[Operator]

And your next question comes from the line of Jon Rigby of UBS.

[Jonathon Rigby]

Just a follow-up on those 2 questions. Is it possible -- there's obviously a lot of moving parts in iGRP, and the results held up very well in 1Q. But assuming everything else is held flat, what would you estimate would be the effect on 3Q or 4Q results from the fall in oil prices in 1Q, I guess, as a way of you've been able to make that estimate just arithmetically?And then also just to follow up on the comments you made about Ghana. Is that deal still alive even with you not being able to complete on Algeria? And particularly, I guess, with all the other things that are going on that were not conceived of in the original contract, it would seem to me that what you're attempting to call -- what OXY will be attempting to complete on is a very different transaction to the one that you thought you were getting into a little over a year ago.

[Patrick Pouyanné, Chairman, CEO & President]

Okay. On iGRP, I mean, the part of the results, which is linked to the LNG plants, LNG assets is around -- out of the 900, it's around 400, more or less. So this part will be impacted. And you can imagine that if the oil price is divided by 2, it will be impacted in a way which is -- which has to be evaluated, more or less, proportionately. I don't have exactly the figures. Ladislas will come back to you, but it's more or less the order of magnitude. So it's not so big, in fact, but it's -- there will be an impact mainly on the results of the LNG assets on the second half of the year. On Ghana, again, I think I just answered to you. Again, a lot of things have changed, including the new environment. So we are working with OXY on it. And as I said before, I think all that is also linked to a position of, again, our authorities and also linked to the environment. But you knew and you know very well, I think, that the main -- the attractiveness of Total of Ghana was not at the same level than the other assets because it's non-operated asset. And so we have less appetite for this one than for -- we had for the other one.

[Operator]

And your next question comes from the line of Irene Himona of Societe Generale.

[Irene Himona, Equity Analyst]

I had 2 questions, Patrick. Firstly, if oil were to average not $30, but around $25 for the rest of the year and given the lack of visibility and if you need in that environment to save another $2 billion, $3 billion, what is the process of introducing a further dividend scrip? Would you call an extraordinary meeting? And why not get authorization now, given the uncertainties, just in case it is needed?And then my second question, just in terms of short-term guidance in the second quarter. What can we anticipate for the group tax rate in Q2 in the current environment compared with the 30% you had in Q1, please?

[Patrick Pouyanné, Chairman, CEO & President]

Okay. I will leave the second one to my CFO, expert in tax. And for the first one, no, let's be clear -- no, very clear. We know the negative impact of the scrip. We know that there is a dilution, that our international investors do not like it. We know that we have used it from 2015-2017. Maybe, by the way, we keep it too long. You take some lessons from the past. And by the way, today, at -- when the price -- the share price is around EUR 32 or EUR 30 per share, the dilution effect is even larger. So I mean it's not for us the right tool. So to be clear, the decision is clear, we will not convene any special AGM to introduce the scrip. So it's why it has been very clear. And clearly, in fact, for us, it's not the right tool if we have to face the -- I mean higher storm like you described. But again, we think that the fundamentals of the company are good -- strong enough, and we are comfortable with what we said. I think we have other flexibilities like the one we discussed just before about M&A, which could come to help the company if we need to help more the company. So I think -- so that's clearly for me -- it has clearly been a negative decision from the Board about this idea, because again, we -- the dilution is to add, and that's a negative effect. And by the way, you -- in fact, at the end, you borrow money at 8% or 9%. So I mean it's quite expensive. So no, it's not the right way to reorganize the shareholder return. So on the tax rate?

[Jean-Pierre Sbraire]

On the tax rate question, Irene, so at $30, $35 per barrel, we could expect group tax rate around 15%, 1-5, taken into account an E&P tax rate in the range 25% to 30%.

[Patrick Pouyanné, Chairman, CEO & President]

And just to complement, Irene, you know that in France when we put a resolution, it's not an option for the Board, we are obliged to use it. So it's complex. So it's why we don't want to be tricked -- to be trapped with a scrip for 1 year because once it's voted in France, we cannot decide not to use it. It's not like some of our colleagues in U.K. have an authorization and option, but we don't have it like that.

[Operator]

And your next question comes from the line of Biraj Borkhataria of RBC.

[Biraj Borkhataria, Director, Co]

Two, please. The first one is on some of the details you've provided. So thanks for all the comments on the levers you're pulling. One of the big ones is obviously the balance sheet. So you'll be adding to debt over this period. So I was wondering how you think about the upper limit on the balance sheet. I think within your compensation score card, there's a 30% ceiling on your net debt ratio. So should we consider that as a hard ceiling?And then second question is on production volumes. Regarding the shut-ins that you referenced in the near term, can you comment on what this means for your production capacity into 2021 and how much you lose there?

[Patrick Pouyanné, Chairman, CEO & President]

Okay. Good. Clear. I think -- I mean the Board put this -- no, it's not the right time to change the variable pay of the CEO, to be honest. So this criteria we have put in place a few years ago, when I took my job, on the gearing, incentivizing the management to take -- to pay attention to that level of debt, so 20%, maximum; 30%, 0. Again, I'm not -- so I think the objective was clearly under 20%. We do our best to be under 20%. And I think we are far from going to 30%. I mean we have some room to maneuver there. I think in the simulation, with what we said about the working capital release and despite -- by the year-end at $30 per barrel, we should be around 21%. I think this is what we have simulated. So maybe it's a little higher than that. So yes, 30% is more than our feeling, but my personal objective is to maintain it lower than that. But again, we don't take decision and the Board does not take decision only linked to one of the criteria of the CEO. There are -- when we came to use the balance sheet in these exceptional circumstances, we are able to take decisions independently of the criteria.Production guidance, I think, yes, there will be some impacts, the fact that we -- when you decide not to drill some short-cycle wells. But we don't have the benefit last year, so it's probably around -- I don't have the figure. I think I read something around 50,000 barrels per day. But again, these are short cycle. So if we want to reactivate them, we'll be able to do it as well. So -- but that's clear that this could have an impact, let's say, around 50,000 barrels per day to give you an idea.

[Operator]

And your next question comes from the line of Lydia Rainforth of Barclays.

[Lydia Rose Emma Rainforth, Director & Equity Analyst]

Just one quick question actually. In terms of the approach that you're taking around keeping New Energies CapEx, I don't know if that was related, but also the digital recruitment going, can you just talk about how you're actually seeing that, whether that's changing in terms of the update that you've given this morning? Is the intention still to keep those 2 businesses largely unimpacted?

[Patrick Pouyanné, Chairman, CEO & President]

Again, yes, New Energies CapEx, which means what I call low-carbon electricity, and fundamentally, it's either renewable or marketing -- and marketing B2C or B2B business, like the one we have invested in India. We have a budget which was announced of between $1.5 billion to $2 billion. I can give you probably between -- nearer to $2 billion than to $1.5 billion this year in 2020 because we have already done some deals. And it's not only organic, it's also inorganic. We are building a business so we need to be serious about it. I think it's part of the future of the company. So we'll keep that. And again, we should be around $2 billion because we have done already these investments in Adani. And first quarter has been very active. When you read the -- if you read the facts, the key facts of the press release, there is more key facts on this part than on the rest of the company, I think, 2 gigawatts in India, 2 gigawatts in Spain, 1 gigawatt in Qatar, 1 gigawatt in France. So yes, we think it's part of the strategy. And this one is -- could be considered as flexible, but we don't consider it as flexible because we are building the broad energy company that Total wants to become. So it's -- and by the way, I would add another element which is important. When you look to this type of business, I know that they have a reputation not to offer the same profitability. When I see 10% of return, which is what we are able to do today after our low CapEx model, when we invest in 100% of an asset, a renewable asset and then we resell 50% of it and we leverage from these, I would say, farm-down part of the profitability, this type of assets, 9%, 10% plus compared to an upstream asset which is volatile, the $30, it's good to have this type of assets as well in the business. So fundamentally, I see this new low-carbon energy -- low-carbon electricity assets are bringing to the company, to the group a sort of more stable balance of revenue. It will take time before it will be at the size that'll influence fundamentally the global business model. But -- so those are the reasons why we intend to stick to these investments. So that means that if we make $2 billion less, by the way, this year out of $14 billion, it makes something like 13%. So people think -- so we are slowly growing the investment -- the share of investment in this business unit.

[Operator]

And your next question comes from the line of Christyan Malek of JPMorgan.

[Christyan Fawzi Malek]

So a couple of questions. First, in regards to the capital frame and the logic of sustained dividend at these levels in the context of CFFO. And the second question is on the impact of the CapEx cuts on the future oil production. So regarding the level of the dividend, now your dividend as a percentage of CFFO is on the highest, it appears, of the European oil, at just under 40%. Regardless of the impact from this current crisis, do you think this is a relatively high level and it limits your ability to spend more on energy transition and your oil growth? Because some of your peers have argued that cutting the dividend is a key enabler. The second question sort of links into that, which is to understand how much oil production has been deferred as a result of the CapEx cut this year. And if you were to raise CapEx, so flipping it around if oil moves higher, would you allocate it into New Energies or oil? Or can you give us a sense of how you sort of reallocate that marginal growth in CapEx? I'm just trying to understand whether the updated energy transition policy comes at the expense of lower market share in oil over the medium term.

[Patrick Pouyanné, Chairman, CEO & President]

I think -- by the way, today, again, we have to -- as I said in my presentation, we are very comfortable. First -- we know that in oil and gas company, we'll have some volatility and we have to accept a certain period of time to use -- to leverage this balance sheet in order to maintain a certain level of return to the shareholders. At the same time, again, as I said, if the barrel is at $30 for longer, for very long, there is a certain limit to what we can do. But at $40 per barrel, the cash flow generation, if -- in a stable activity, I would say, is around $19 billion per year. $19 billion, $7 billion of dividend, I have $12 billion for investing. I think we are fine with that. We have -- that means that, yes, we have to make some choices. And from this perspective, on the second question, I think with $1.5 billion to $2 billion as an average, we are fine to grow it steadily.This morning, you noticed probably in the -- I will come back on it, in the climate statement that we said that will reach 20% of our capital allocation by 2030 or sooner, which means we have time to grow it. We think that there is also a certain level to build. It is -- so I don't think that this -- and I understand perfectly the question, but we -- but this dividend at this level is impairing the execution of our strategy. The CapEx cuts impact on this year production are really minimum. I mean when you have a CapEx program of infill wells that you cut in the second quarter and third quarter, the production could reduce, I think it's a matter of 10,000. By the way, this would have been done in countries like Angola where you have some quotas. So I think our decision was just maybe anticipating the OPEC+ decision. So I think it's almost very limited impact, in fact, for this year. For next year, it has a better impact.Where should we allocate capital if we have more cash? Again, I think, to be clear, we don't -- we have a road map of growing steadily this low-carbon electricity business. It will take time. We need to learn. We have to identify the right opportunities. There is no hurry. We are releasing a road map for climate until 2050 with some steps. And I will come back on it in my next presentation. So I don't feel that today, we have the necessity to free some cash from the dividend to transfer it on increasing the CapEx of this business unit. But if we have more, I think priority will be to allocate the capital to where we have the higher return. And so if my short-term wells in Angola are quite -- by the way, they have a good return, 20% or something like that. Providing the price come back to an acceptable level, we will reactivate this flexible CapEx. It's part of the business model we have defined, to have a sort of flexibility on the CapEx we allocate also to the Upstream part.

[Operator]

And your next question comes from the line of Martijn Rats of Morgan Stanley.

[Martijn Rats, Managing Director and Head of Oil Research]

Yes. It's Martijn Rats from Morgan Stanley. I had 2 questions as well. I wanted to ask about the Downstream guidance, this figure of cash flow of $5 billion to $6 billion for the year. Last year, I think both the various Upstream -- Downstream divisions together generated $7 billion. And this year, we still have multimillions of barrels a day of demand destruction. I know like 2Q was particularly weak. But across the year, it seems like a very small drop for the dramatic events that have just unfolded, which I was hoping you could sort of explain that to us. Why isn't the Downstream weaker, given the level of demand destruction? In 2009, we saw very, very weak Downstream results across the industry, and that was based on this 1 million barrels a day of demand destruction. I -- honestly, I generally sort of don't fully understand how that works. So if you could explain that, that would be much appreciated.And secondly, I wanted to ask JP2 what his estimate is of the amount of headroom that exists within the current credit rating. That would also be very useful.

[Patrick Pouyanné, Chairman, CEO & President]

Okay. So on the Downstream, I think the Downstream is a mix of different cash flows. We have the refining where, clearly, we'll have a lower cash flow, a lower utilization, which is directly impacted by the lower demand. The M&S business, what we observed in China is 1 month after the end of, I would say, the full closure of the country, we have reached levels of business which are around 80%, 85% back to the normality. So if we add back that level coming back quickly in Europe, just like I told you, when we think that we could -- I would say we are generating normally nearly around $2.5 billion of CFFO. We give you that we could lose $600 million. So maybe we are missing there by $100 million, $200 million, but not more. Petrochemicals could do good, very well, I mean, so we are optimistic on it. And don't forget that refining and all this business in Downstream are also traders -- the trading business. The trading business loves times when you have a lot of volatility and contango. By the way, they have borrowed some money to the group. Part of the increase of the working capital is linked to our traders. We are storing. So I'm more optimistic than JP2. I think that the working capital of today will be the big benefits of tomorrow before the year-end. So we have to deliver. So all in all, my view, Martijn, is that to be -- to give you the full story, I was the one who put $5 billion to $6 billion. My Downstream people are a little more optimistic. They look more to the $6 billion than the $5 billion. But I'm a little like you. But I would be surprised to have less than the guidance that we propose you.

[Jean-Pierre Sbraire]

So regarding the credit rating, as Patrick mentioned to you, of course, having a good credit rating is very important for us. And to maintain A credit trading is part of our priorities. What I notice is that despite the revised price deck from both S&P and Moody's that was revised in March or in April, we maintained our rating. So that's good from our perspective, changes from stable, positive to negative on both S&P and Moody's side. It was, by the way, the same for all our peers. So it's true that if the prices remains at $30, $40 per barrel, I think as our peers, we'll lose one notch probably. But it's not what has been confirmed until now by the agencies. And so let's wait and see.At present time, S&P, it's my understanding, makes it calculation using a $30 per barrel price deck for 2020. That's for 2020. '21, they use higher price deck. So once again, if we remain at $30 per barrel over a long-term period, probably we'll not be in a position to maintain this rating, but we will definitely keep our A rating. So that's -- once again, it's one of our priorities.

[Patrick Pouyanné, Chairman, CEO & President]

Yes. The A rating has always been linked to the gearing and all this business. So it's important for us. But we have some room there to manage that.

[Operator]

And your next question comes from the line of Oswald Clint of Bernstein.

[Oswald C. Clint, Senior Research Analyst]

Yes. Obviously, very tricky to call demand recoveries. Let's think about next year, over the next 5 years. I just -- and some of your peers are finding it obviously very tricky, and some of them have a bit more comfort around the path for demand recovery. So I just wanted to know if you, as a team, have -- with your experts and with your people on the ground have formed some view of how demand might recover from here? I mean jet fuel, traveling, people flying, people traveling by car and public transport, et cetera. That's my first question.And then secondly, obviously, quite impressive to see another countercyclical acquisition here in terms of Uganda. It's characterized as low-cost barrels. I just wanted to maybe test that assertion. I -- is it truly low cost, including transportation and pipelines? Is it -- I mean at least at the forward curve, I seem to be getting around 10% return. I just wonder what I might be doing wrong there. Or is there some type of expression of oil prices recovering potentially back up to the $50 or $60 level, please?

[Patrick Pouyanné, Chairman, CEO & President]

So recovery, I would love to be able to answer to your questions, that's part of the uncertainty. To be honest, I'm more optimistic about the cars than the jets. The cars -- what we observe in many -- in China is that, in fact, people are using more of their cars because they are afraid to use public transportation than before. So I think, once again, people are free to move. And that's the question mark. I think they will come back to use their cars. And I -- we expect, I would say, the retail business to come back to a certain normality. The jets are more afraid. But for me, as long as we don't find a vaccine or, I don't know, which medicines, I'm afraid the countries will close their borders in that there will be limited -- it would be difficult to fly again around the world, I mean, because each country's government will have a first priority to safeguard the health of their people. And so I'm more pessimistic about the jet fuel business than for the gasoline and diesel business, which is more, I would say, continental business than are world business. But then, yes, I would love to have a precise answer to your questions.On the second one, yes, I mean, there is a big -- huge amount of barrel, 1.5 billion to 2 billion barrels. So it's onshore. It's not very difficult to produce. Yes, there is a pipeline. It's true as well. We all know that. But we know that when we look to these type of projects, we have some thresholds. And if we have done this acquisition, which is quite good compared to the previous deal we have done, we have divided almost by 2 the cost of acquisition. So it was -- and we have been quick to find a solution with Tullow. If we have done it, it's because we expect at least 10% return, yes, even at a lower price.I will take the last question. Maybe after the second session of Q&A, we could take other ones, but I would like to move on to climate. The last question maybe.

[Operator]

And your last question comes from the line of Thomas Adolff of Crédit Suisse.

[Thomas Yoichi Adolff]

Just one clarification on the dividend. I guess the decision on the dividend today as well as some of the commentary you made on the call suggests to me that your view on the macro for the medium and longer term has not changed. So basically, what you are saying today is let's wait and see. COVID-19 may not have any structural implication on how oil is consumed and I want to wait until maybe 3Q 2020 to see how economies recover and what the outlook may be for 2021 before making a fundamental decision on the dividend. Is that how I should think about the dividend and the dividend decision?And then secondly, just going back quickly on LNG. And LNG -- or integrated gas contributed very strongly again, and it did so in the fourth quarter as well. I wanted to know a little bit more about U.S. LNG, whether it contributed positively in the first quarter and how we should think about the rest of the year. Clearly, when you look at prices today, it's out of the money.

[Patrick Pouyanné, Chairman, CEO & President]

Okay. I mean, Thomas, you did not listen to everything what I said. I told you that we have strong fundamentals and that we have time. We can use and leverage the balance sheet to maintain the dividend. I think it was the more fundamental message that I delivered. I also told you that we think that -- and both think that it's premature to take decisions when we see nothing because you could -- which means -- does not mean that we'll take -- let me put a question mark on the dividend policy in the Q3. I just told you that we think that we'll have a better visibility by Q3 and that it shares some fundamentals. I mean I'm reading, like you, a lot of papers. Again, it can change, the visibility, and the price could remain, as I said, because of my inventories at $30, $40 per barrel. But as I told you also, $40 is very different from $30. So it's a question of appraisal of how long it will take to recover this oil price.On the medium and long term, no, I think, again, what we said about oil, of course, it's linked to the demand, but when you don't invest or you invest -- the investments in E&P will again be lower than before. The shale oil, which was the way to ensure the production, will be impacted and quite quickly. According to our model, when we -- if you have a decrease of shale oil production by 2 million barrel of oil per day this year and people are more or less reducing the investment, it could become 4 million next year. And so it could accelerate the miss in terms of production. Of course, all that is linked to the pace at which demand will come back. On that, I don't have a crystal ball.So we think that, again, these type of decisions -- we have the capacity with our balance sheet and our low breakeven to be resilient, to -- and not to overreact. And that's for me the main message. And so there is no -- I didn't give you a missing point in Q3 to tell you we'll take another decision on dividend. It's not what I told you. I told you that we can be resilient and the fact that, by the way, we decided to give up on any scrip option for the coming year is, I think, a clear signal of trust in our fundamentals.On U.S. LNG, I have -- I don't know if we know the answer. We know our short-term yield -- purchases represent 25%, although sales around 10%. I would say that, for me, this part -- what I know, that in iGRP, I can tell you that in first quarter, the trading of LNG has been quite positive. And it's also linked to the capacity to have all these world network of sources of LNG in the U.S., in Australia, in the Middle East. So it's part of the systems that we have established. And what I observed is that quarter after quarter, they are improving the results. So I think this is also part of the business of arbitration between the different sources of LNG, which is a business model I want to develop. So I mean there are some plus, there are some minuses. But what I observed -- and it's -- but again -- and even when we acquired the Engie regas capacity in Europe, it was considered as a burden. Today, we are full at 80%, and we make money out of all these type of assets. So I think the message around LNG and one of the strengths of what we have built is more to have a global system with productions and outlets and customers and regas capacities, which allow them to optimize it.

[Operator]

[Operator Instructions] And your first question will come from the line of Bertrand Hodee of Kepler Cheuvreux.

[Bertrand Hodee, Head of Oil and Gas Sector Research]

Two, if I may. One, on LNG, you disclosed some very useful new indicators for those Q1, and it is your LNG average selling price. It is something that is quite difficult for us to model given some S-curve on long-term oil pricing contract. Can you give us a flavor of what could be -- if your spot LNG stay at the same price, what would be your average LNG selling price in Q4, let's say, with $30 per barrel in Q2? And then the second question is on LNG, but that relates now to the energy transition and your ambition of getting to 0 -- net 0 on Scope 1 and 2. LNG activities are quite, I would say, CO2 intensive. As I understand, you do venting and also liquefaction process, highly energy intensive. How can you improve the carbon effectiveness of your existing LNG plant? And what is -- do you have a view of the LNG plant of the future?

[Patrick Pouyanné, Chairman, CEO & President]

So the first question I already tried to answer before. I told you that, in fact, this indicator -- by the way, yes, we thought it was important for you, on the side of the LNG business, to give you more information because the gas price, honestly, is the average of many local business -- LNG business. So you will have this indicator from now on every quarter. As I said before, very, very little impact, I think, should stay around $6 more or less for the next quarter because there is a time lag within the formula, more or less, of 6 months. And then after, of course, we will have to see the impact and, let's say, around $4 on the second half, probably, because the impact will be -- will come -- from the lower oil price will come in the second half. So $6 during the quarter and then $4, average of the year should be around $5. And the second question, LNG, yes, that's a very important question, of course. By the way, when you -- I know there's news about the debate about LNG is more CO2 intensive on its own. LNG plant is like a refinery for oil. So when you compare both chain, you should compare oil and refinery to gas and LNG. That's true, but for the existing plants, to be honest, they are already built. It's not easy. You can work on part of the emissions on, in particular, between the wells and the plants itself. The plant itself are designed, so it will not be improved. You can also improve and lower the emissions from the transportation part, from the LNG tanker part. There is still some -- and it's easy to improve the technology. It's an industry where we are losing some LNG during the trips, and we can do better. And there are really some improvements on the way these LNG tankers are designed, and that's part of what we work on it. The new plant should be electrified. This is the one we want to build in Oman. We have a small project in Oman of LNG plant for bunkering. And the beauty of this plant, for me, the big interest on this plant is not only to produce an additional 1 million tonne of LNG and to develop the bunkering business, but it's a full electric plant, designed like that, and it's a way to test this technology. And the full electric LNG plant is lowering the LNG emissions by a lot. And so I mean that type of -- and again, by the way, it's a very clear example that the best way -- in most of the processing of the oil and gas industry, to eliminate the CO2 emission is to go to electrify. The process is like what is done in the North Sea by one of our colleagues. I think it's the future of this industry, and this is -- our engineers in the E&P are working on these type of technologies.

[Operator]

Your next question comes from the line of Christopher Kuplent of Bank of America.

[Christopher Kuplent, Head of European Energy Equity Research]

Just a few more questions and perhaps clarifications, if I may. Patrick, your CapEx cuts that you've announced for 2020, how quickly do you think you will go back towards, let's say, the originally $10 billion to $14 billion organic CapEx number? How related is that trajectory to the macro environment? In other words, what can you do in 2020 -- sorry, 2021? Particularly thinking about FIDs that I suppose will be coming up over that time frame whether it's Uganda, whether it's Papua New Guinea, Surinam, Nigeria. If you could give us a little bit of flavor there. And the second question linked to your net carbon footprint outlook, a little bit longer term. It wasn't so long ago, you talked about a DPS CAGR commitment of more than 5% per year. I'm assuming that when you look beyond the next 1, 2, maybe even 3 years, that's still something that you will remember in a few years' time. If you could let us know where you stand on that dividend outlook.

[Patrick Pouyanné, Chairman, CEO & President]

It's quite easy to answer your question. You make the math. If you want me to spend $14 billion, I have $7 billion to $8 billion shareholder return, so I need $21 billion, $22 billion, and I need something like $45 per barrel, $50. So I will come back to this level of investments when we will have this type of outlook for the price. That's part of it. And again, keeping some flexibility in the organic CapEx. So I mean for 2021, honestly, I have no idea today. It's premature. We are -- I know what figures we had in our long-term plan last year, but we will do, again, the business plan. We'll do, again, the exercise. But we are very comfortable, like I said before, at $40 per barrel. And again, you would tell me today, it was the discussion of the Board, what would be your guess for next year, I answered if I had to give to my teams an assumption for the budget, but thanks, God, I don't have to deliver it today in March or in April, I will do that in July, I will probably give something like $40. So at this level, we know that what we can -- what type of capital allocation we can make. That's the first answer. On the second question, what was it, the question? I don't -- I lose the second question, sorry.

[Christopher Kuplent, Head of European Energy Equity Research]

It was regarding your long-term outlook regarding the DPS.

[Patrick Pouyanné, Chairman, CEO & President]

No, no. Okay. Maybe clear -- no, no. It was clear, the dividend. Now the dividend was clearly linked to both. I mean we are more in a stable environment that was above $50 per barrel. It was linked to the growth of the volume as well. Remember, we are speaking about the production growing from 3.1 to 3.2, 3.3 and stable during 2 years. So this outlook today, we have -- we are no more above $50. And we are no more at the same level of production because of quota. So I have 2 sources of lack of growth. So a little bit lack of, I would say, cash growth. So it's affected -- it's not affected by net 0 at all, let's be clear. No. Net 0 will not influence that, to answer to your question. So I'm still committed to it, but obviously, we stopped, and you have observed that we -- the Board has decided to stick to the stability of the interim dividend compared to the one last year ago because it makes no sense in this type of environment to grow by 5% something that there is no more growth. So it would have been very odd to take such a decision when others are just deciding to decrease it by far more. So I mean, it's still there. It's still in my mind. But for the time being, honestly, in these market conditions, maybe it's lower. Let's wait 2022 or 2023. I'm optimistic, one way or the other, the world will come back to a certain normality. And then lack of investment could translate in -- will translate in higher oil price.

[Christopher Kuplent, Head of European Energy Equity Research]

Okay. Patrick, can I just quickly double check on your first answer? What is a lower budget? Let's assume $40, as you said, into 2021. What does it mean for a number of those flagship projects and how quickly you think you'll be able to FID them?

[Patrick Pouyanné, Chairman, CEO & President]

Again, at $40 per barrel, I have $19 billion of cash flows. I serve you $7 billion, so I have $12 billion for CapEx. Then if I would invest -- what if I want to invest more? I would like to divest more.

[Christopher Kuplent, Head of European Energy Equity Research]

Okay. I guess I may not have been clear, but maybe you can prioritize a little bit those projects that haven't been FID-ed. I guess...

[Patrick Pouyanné, Chairman, CEO & President]

Sorry, I missed that part of the question. So top projects, honestly -- let me be clear, the projects we have sanctioned, we don't stop them. So Mozambique is moving on. And I think for me, among the top projects, we'll have obviously the Uganda. We are investing in Uganda. So the idea is fundamentally to move on Uganda and -- as soon as we can. I think we made that investment to deliver it. And I would say also, we have to look to projects like our discoveries in Surinam could -- which seems to be quite promising. So it could become -- as well. But the way to run the projects will be obviously like always in Total, by their -- I would say, breakeven costs of each of them, and we'll invest the money on the ones which are the most efficient. On the other side, as I answered before to Michele, I don't think we'll add a lot of LNG projects, except maybe Shell in the coming year in terms of sanction.

[Operator]

And your next question comes from the line of Lucas Herrmann of Exane.

[Lucas Oliver Herrmann, Head of Oil and Gas Research]

I'm glad you're all well. So I'll ask one on the pro forma presentation and then move on to climate. On the -- in your presentation earlier on, I just wondered to what extent what we've seen over the course of the last 3 months, particularly the behavior of suppliers, not least the commencement of a price war at a time when it really don't seem hugely appropriate, has influenced the way you think about the commodity and the Upstream business going forward. And I guess that becomes increasingly relevant given everything around climate change, shifting in portfolios. Because, clearly, as the growth opportunity in hydrocarbon starts to moderate, you'd expect the competition for the business that is actually available to intensify. So sorry, a long way of putting it, but first question, just how -- what's happened in recent months for suppliers that influenced your thinking? And then moving to the portfolio going forward, just a couple of simple questions, if I might. When you talk about business sales to customers, I'm never quite sure whether that's products that you source or that you produce yourself or whether it's inclusive of products that are bought in, whether it be electrons or whether it be oil barrels itself. Do you expect to grow energy supply to the market -- I guess own energy supply to the market over the period to 2050? And the question is simple. It's purely that there is an awful lot of energy associated with an oil molecule. You need an awful lot of electrons to substitute.

[Patrick Pouyanné, Chairman, CEO & President]

Okay. Lucas, as always, very good questions to make, [ to ask ] with me. Thank you, Lucas. I would say the first one, it's clear that, honestly, what I've observed and my first reaction is that this industry, the oil industry, obviously, has a real difficulty to manage itself and has a good capacity to create huge volatility. And frankly, when you observe that at a time where the demand declines, people will decide to increase the supply. You are a little -- you say to yourself, we have an issue. And I'm not in control. We are not in control of it. We are -- as a company. And so that means that it's clear that it obliges us to think. And the conclusion I have first made, I said to my colleague, is when we said that we sanctioned at $50, it's clear that we sanctioned at $50. And stock coming sometimes to me with a $55 or $60 because that means that all this math that we do in economic models with $50 flat are just wrong. And you can be it when you start a project with suddenly a $20 per barrel price, and it's -- the value is not the same. So I think the first lesson for me is, yes, there is a strong volatility. And what I said before, when I answered to one of your colleagues, from this perspective, it's clear that in the business model of groups, energy companies, to try to find some less volatile businesses which are offering profitability -- acceptable profitability could make sense. And when you have access to some long-term renewables PPAs, it's maybe less risky, less volatile, and it give a balance within the business model of a company like Total. So I think it's clear that it gave -- it gives some momentum to develop this type of business. Today, the company, we have this marketing and retail business, which gives this type of stable revenues. But if at the same time, around the next 20 years -- 30 years, people do not want to use petroleum products to run their cars, we'll have to find some substitute in our portfolios to this type of more stable cash flow businesses. So that's why I'm there, but it's clear that it has influenced, I would say, my -- the feeling that it's really a very volatile business and continue to be very stringent on the way you approve the projects and -- more than ever. And it accelerates, from this point of view, the fact that economically, we could be -- we could face oil business with lower demand -- decline of demand. So that means that let's be very selective on the project we sanction. On the sales to customer, the only thing -- when we speak about, in Total, we strongly believe that you need to be along the chain, so you're not only selling but also producing. So -- but yes, there could be imbalance at a certain point of time. But the strategy within the company, it's clear, if you want to develop a pure B2C portfolio in electricity and you just go to the market to provide your supply, you will not make a lot of money. I can tell you. Maybe your traders will be happy, but you don't make a lot of money. So -- and again, I think it's the same idea fundamentally that we have in the oil business or the gas business. We want to have some customers, but we also want to be able to produce. In electrons, we produce it either from -- mainly from renewables, probably in the future, but also from gas-fired power plant, and we make money out of it so -- especially in Europe. Europe -- a continent like Europe, which is willing to exit from coal, more or less from nuclear, at the end, if you don't have a baseload from gas, I don't know where it comes from, the flexibility to cope with the intermittency.So the ambitions on both sides, even if it's a famous Scope 3, to come back, as I am informed, we are not so -- we don't like the Scope 3. The Scope 3 only it reflects products we sell and not -- and so we could also sell from third party, but the strategy is more to integrate the value chain.

[Lucas Oliver Herrmann, Head of Oil and Gas Research]

And energy growth, will you be filling more energy?

[Patrick Pouyanné, Chairman, CEO & President]

Yes, we are filling more energy in our model. Yes, yes. If I want to -- yes. It's a good question, and I gave you the percentage of the portfolio. But in fact, if you want to reduce by 60%, at the end, you sell more energy, you sell more energy. You have to wait until September to have more clarity on this sentence.

[Operator]

The next question comes from the line of Lydia Rainforth of Barclays.

[Lydia Rose Emma Rainforth, Director & Equity Analyst]

Just 2 from me, actually. The first one is just in terms of the interim targets that you set of, let's say, 15% for 2030, it does seem to be a slower pace relative to what you had in the first part, relative to the 6% reduction in carbon intensity for 2015 to 2019. It's only in the 9% over the next 10 years. And again, the ambition for your Scope 1 and Scope 2 emissions doesn't seem to have the same pace of improvement coming through. So is that just an effect of you got the easy stuff very early on and it now gets more difficult? I'm just trying to work out whether that's a cautious assumption around where the carbon emission reductions come through or whether it just gets more difficult? And then the second question was in terms of the Net Zero Emission for Europe, does this work without a material step-up in carbon prices? And I know you talked about $100 per tonne in terms of that 20 -- from 2030 onwards. But do you actually think there's a realistic policy chance of getting that through in Europe to make those changes?

[Patrick Pouyanné, Chairman, CEO & President]

Good question. The first one is you are observing our figures. At the end, the fact that we are already at 6%, it will become detrimental to us. In fact, no, we had some easy, low-hanging fruits. And then we decided in 2015, '16 to exit coal. So when you exit a business like coal, it gave me immediately 2% or 3%. But it was a decision which we decided also to eliminate some cash flow from operations because we are making more or less $50 million -- or $80 million per year. So that's the reason why. At the end, no, we don't slow the pace of CO2 reduction. It's more, again, the capacity of allocation of capital. I don't think we are cautious. I mean even when some people around the table have looked to the figures, they think we should really continue to work like we have done. If we can do better, quicker, we can do it, we'll do it. But we are not alone in this business. I think we are facing competition. And the bigger we'll become in this business, the more of the competitors will also be aggressive. So there are quite a lot of people working on the same ideas around energy -- I mean, decarbonized energy, renewable business. So we have also to be pragmatic. So no, it's some step that is done. We have already made some investments. We'll have to do more, obviously, to continue to develop, to grow the business. And so it's more or less as I -- if you remember the figures I gave you, I told you that we should have -- it's increasing every year an additional 1% per year of electrons in the portfolio, in fact. So it's 5% after 5 years, 15% after 15 years, and then you continue. So it's not a reduction, but it's not an acceleration as well. It's to do it in a pragmatic and profitable way. On the second one, yes, you are very true, but -- you are very true, but I don't see -- I mean, to be clear, if Europe is --I think Europe is serious about climate. If you want to be carbon neutral in Europe by 2050, there is no other way to step up the carbon pricing. I mean that's clear. We will develop -- I mean, I didn't mention that we are participating with Equinor and Shell in Norway to the first large-scale CCUS project, Northern Lights project. When you take out, there are some -- lots of subsidies from the Norwegian state. But more or less, the dollar per tonne, the production is around $180 per tonne of CO2, which means that this type of project -- of course, we can think that we will improve them in terms of efficiency in the future even if, to be honest, there is no -- the room for improvement, it's a well, it's a plant which is treating gas. Maybe in the transportation system, we can do better. But that means that this type of CCUS project will require a price over $100 per tonne if they want to become commercial businesses. And if we want really to be -- and so Europe is serious about climate change. But with carbon neutrality, that means carbon pricing. And so we have to take that into account as well when we think to future allocation of capital that this will become -- it could become a reality. Then all that will be -- will take time because if a society wants to be neutral -- as you know, the citizens are always looking to their pockets, and they don't want too much to pay for it. And so as you know the best business that we had in the last quarter for Total in Europe was fuel oil, heating fuel oil, heating oil. The French people have rushed to fill their tanks because it was a very low pricing. I'm not sure it's good for the climate, but this is the reality of the energy business. So this is where you have a debate of do you manage at the same time to have an affordable energy and a clean energy. And that's more energy with less carbon, but the stronger challenge of the industry.

[Operator]

It comes from the line of Martijn Rats from Morgan Stanley.

[Martijn Rats, Managing Director and Head of Oil Research]

Okay. I have 2, both related to the discussion on the climate and the move into low-carbon electricity. I was wondering if you could talk perhaps a bit what you think are transferable competitive advantages from your traditional oil and gas business into this new business. And I think electricity markets do not look like oil markets. One is more global, the other one is more local, regulatory changes. But then again, Total is in many, many businesses. I was wondering what your view on this issue is. And the second question I wanted to ask when it comes to this transition, I was wondering if you regard your own cost of capital as a disadvantage, building out a new energy business. Does it require a lot of money sort of chasing these renewables opportunities? And it seems very, very competitive and quite a lot of auctions for offshore wind projects, for example, seem to be simply won by people that have very low loss -- very low levels of cost of capital. And I was wondering whether you believe that with a -- coming from a traditional -- oil and gas backdrop, cost of capital is a source of competitive disadvantage.

[Patrick Pouyanné, Chairman, CEO & President]

So I think the advantage of -- one of the advantage, maybe what we have done in the last quarter is a good example, is that a world company like us, we are -- is able to deploy this business in many very different countries, finding the best opportunities. Look at what we have done. We have been able to have access to 2 gigawatts in India, 1 gigawatt in Qatar, some in Europe. So I think the capacity that we have, because we have a world footprint, to work on many geographies and to identify the right opportunities because we have several linked -- by the way, in India, it's interesting because we developed this relationship with Adani group because of the natural gas, LNG and then we move to renewables. So I think that's something that may -- when you look to people who are more today dedicated to these, let's say, electricity business, they are -- while the leaders are more focused on Europe plus there is Americas, south or north, so maybe there is -- so I think there, we have access. The Qatar story, of course, it was linked to our capacity to develop in Qatar. So I think that's an advantage. Having said that, when you speak about the offshore wind, this is very obvious that there are some technologies. And in Total, for example, what we have decided is that the offshore wind team is embedded in terms of technology and projects within the E&P division. By the way, it's very good because the E&P guys were afraid to have less jobs. Today, they are very excited by developing all their knowledge about floating units for this offshore wind, floating offshore wind. So there is some links which can be done, the scalability of it also. So I'm -- I think there is -- okay. That's true, but -- so offshore wind is giving more technology. So it's more obvious. On the solar fields, obviously, there, it's more the size of the capacity where we have to finance large projects because the projects itself are less complex. But we can also -- within this industry, we made, for example, some new recent deals in Spain. What we bring in Spain is the capacity to mobilize financing because we have a lot of developers today who have a lot of ideas but not money. So we can come and bring their ideas to reality. So I think there are -- I mean we have some advantages. Of course, we face some competition, but it's also -- I don't see why we could not manage by diversification. On the cap -- cost of capital, again, that's true that today, with the yield we are offering to our shareholders, it's quite expensive. But I hope that -- the fundamental idea is that we raise the share of Total by being disciplined on our dividend, but also by developing this low carbon business. Today, that is a disadvantage. Again, that's true, but I'm asking my teams to be able to deliver to the group more than 10% of return, which oblige us like -- we design the business model, when we develop 100% project, to farm down 50% to companies who are ready to pay NPV 5, like we've done again recently in these 2 or 3 countries. Honestly, it's not a real issue for us. But -- to share this project at 50% but -- and to keep a certain discipline of profitability, I think, is also good for the global future of this business because today, it seems quite easy to obtain some long-term PPAs with, I would say, stable revenues. When you go to more merchant renewable projects, the volatility could be stronger. So the level of profitability will be definitely higher requested by the investors. So it's not a disadvantage. It's a matter of managing the business in other words.

[Operator]

And your next question comes from the line of Anish Kapadia of Palissy Advisors.

[Anish Kapadia, Director & Head of Energy]

I have a question on the impacts of COVID. Obviously, seeing some short-term impacts. But I really wanted to know what you think some of the structural shifts will be on the supply side for oil and gas and how you see that influencing your longer-term strategy, so things like decline rates, the change in production from the U.S., both gas and oil, and any permanent supply disruption in kind of LNG markets. So how is your thinking on those affecting your longer-term investment strategy? And then the second question was on your net zero presentation. If you're talking about $100 per tonne carbon price in terms of the testing price, can you talk about how you get to that kind of price? And with the assumption of 50 million to 100 million tonnes of carbon sinks, is that implying a kind of cost of that $5 billion to $10 billion over this long term?

[Patrick Pouyanné, Chairman, CEO & President]

Okay. The first question, we can take a lot of time to answer to that. I think, okay, COVID first has an impact, a short-term impact on the demand. Once we'll find a vaccine or other tools, I think, we'll manage to exit it. I think this will have clearly an influence on, I think, the development of this shale oil in the U.S. I think my view is that already last year, for the last 2 years, we've seen investors more prudent about investing in shale oil, requiring cash flows out of it. Obviously, on the top of it today, it appears to be that is -- it's maybe flexible, but it's not a low cost, first of all. So I think this could influence the global landscape of the oil supply in the world more fundamentally not just during the COVID period. People forget, but maybe not. And I think it could impact the way that people will be ready to invest in this industry. It does not change a lot at all my view. It's even become more comfort to the views of Total, but we will not invest in this one. On the gas in the U.S., it could have a different effect. If you have a lower production of shale oil, which means that the gas associated to shale oil could be managed, then it could influence at the same time the price of gas in the U.S. in the other way. So we have to look at it. And in particular, because we are investing in LNG in the U.S., should we integrate from the gas for the longer term? That's the question mark. I'm not sure to have implied -- to have fully understood your question about $100 per tonne. The idea -- fundamental idea to ask our colleagues when they present an investment case, in particular, in hydrocarbon, which will go beyond 2030, to test to -- the base case is a $40 per tonne. But to check what we give, if the carbon price is reaching $100 per tonne, you see the influence. And it's a way to test them against, I would say, a carbon neutrality business. So that was the -- I'm not sure if I captured it correctly, Anish, your question.

[Anish Kapadia, Director & Head of Energy]

Yes. It was more -- given that you'll need to invest around 50 million tonnes plus of carbon sinks, what's the expected cost that you're thinking that will be associated with that based on the capacity, kind of $5 billion per annum in terms of the costs...

[Patrick Pouyanné, Chairman, CEO & President]

No, no, no. Because 50 million tonnes of carbon sinks at this horizon, some are, I would say, natural-based solutions. And the natural-based solutions, we begin to work on it, are more around less than $10 per tonne. And you have plenty of projects of natural-based solutions. So if you consider that half of them are natural-based, it something like $250 million. The other half is around -- are coming from CCUS. That means that you will use 25 million tonnes. Let's say, $100 per tonne because the technology should more or less be at this level, it's at $2.5 billion, so it's more around $2.5 billion to $3 billion in 2050, yes. We have time.

[Operator]

Your next question comes from the line of Irene Himona of Societe Generale.

[Irene Himona, Equity Analyst]

Had one question on climate. As you said, you cannot control the emissions of industries like cement or autos and so on. Do you see any advantage in partnering with some of these energy-intense customers, let's say, to help them address their emissions, the emissions produced when they use products that they buy from Total? It is something that one of your peers is...[Technical Difficulty]

[Patrick Pouyanné, Chairman, CEO & President]

Sorry, Irene, I was cut. Are you there, Irene? Hello? Who is there?

[Operator]

[Operator Instructions] And the line appears to have disconnected, sir. There are no further questions. We have no other questions. The floor is back to you for closing.

[Patrick Pouyanné, Chairman, CEO & President]

Okay. I will close. So Irene, I understand you asked a question. Sorry, we have been disconnected. I'm afraid. It was a mistake -- my mistake. So Irene, your question about partnering with the industrial clients, cement producers. Yes, I think it's a fundamental idea. We have engaged in many -- we need to have some demand. So to act on demand, we need to work with others. And I have pushed my teams to really take some time, for example, with plane manufacturers or marine industry and steel. We are working with steel companies to see how we could think and change the way they produce energy and looking to other sources of energy rather than only oil. So that's part of what we want to proactively work on. And the commitment we take, by the way, is well expressed in the joint statement that we have signed with Climate Action 100+. It's also part of the commitment which is to bring some of our competencies and capabilities to help change the energy use of our customers. So thank you for this long call. I think it was the last question. I know we have been quite long this afternoon. We've covered many topics. Maybe in these extraordinary circumstances, we need to have extraordinary calls. I hope we have answered to most of your questions. And again, I think the message that we want to deliver to you is that Total, I think, even if these times are very turbulent, we need to stick to our strategy, the fundamentals of the strategy. And I think more than ever, the fundamentals of actions are clear for a commodity company like Total, looking to our delivery, looking to our costs, managing our cash and staying the course for the long-term strategy. And I think it's a good signal that today, notably, we speak about the short term and also about the medium and long-term strategy for this climate ambition. So thank you again for your listening, for your support, and we hope to meet you soon, all of you. Thank you.

[Operator]

Thank you very much, gentlemen. Ladies and gentlemen, that does conclude your conference call for today. Thank you for participating, and you may now disconnect.