Equinor ASA (EQNR) Earnings Call Transcript & Summary

Good afternoon. It's good to see you all. I would like to welcome you both those of you who are here in the room and also those of you who follow this event digitally to this presentation of Equinor's Energy Transition Plan. My name is Bård Glad Pedersen. I'm heading up Investor Relations in Equinor. Today, we will have 2 presentations. First, from our CEO, Anders Opedal, and then from Jannicke Nilsson, our EVP for Safety, Security and Sustainability. And then we will have a Q&A session. [Operator Instructions]. Then we are ready to start with the presentations. But finally, let me remind you of the forward-looking statements that are included in the deck. And then I hand it over to our CEO, Anders Opedal. Anders, the floor is yours.

Thank you, Bård, and welcome to this energy transition update. It's good to see you, and thank you for coming. And as always, I will start with a safety moment. This graph illustrates what we call the Karsto catch. The dip in signal was an early warning that the compressor turbine was developing a problem. It shows the resistance of the lubricating oil from one of the turbines bearings monitored via a sensor. A healthy bearing shows a stable, high resistance. While a non-healthy one will show sudden drops and the drops are caused by tiny small pieces of metals creating contact between the axle and the bearing ball. Early detection allowed us to plan the maintenance of the turbine in an optimal manner. And by this, we can minimize downtime, reduce the risk of potential safety issues and reduce the risk of mistakes. This is good for safety. And by reducing downtime, we also saved more than $30 million. And this is just one example of how data that we collect from more than 22,000 sensors improves performance and adds value. We monitor over 700 pieces of heavy rotating equipment and using machine learning algorithms to look for deviations. And also, we expand this solution across the value chain. The most recent example is from our offshore wind farms at Sheringham Shoal, we reduced unplanned downtime by 10% over 3,000 hours of production last year. So using artificial intelligence to monitor equipment on an industrial scale improves our safety performance, our production uptime and our efficiency while also driving down costs. Our updated energy transition plan reflects our strategy and business opportunities in the transition of energy systems. So let me recap the headlines from our capital markets update. First, we are positioned to continue delivering industry-leading return on capital employed above 15% all the way to 2030. Second, we are doubling our expected oil and gas production growth with more than 10% from 2024 to 2027. We achieved this without increasing our CapEx outlook. Third, we are increasing our free cash flow and expect $23 billion over the next 3 years. And finally, based on this, we announced a competitive capital distribution, $9 billion in total for 2025 and a strong commitment to deliver on a competitive level also in the following years. We have taken clear actions to improve our cash flow and growth. We believe this represents a stronger value proposition to shareholders. As a result of changing market conditions impacting our business opportunities, we have made adjustments affecting the pace of our energy transition. At the same time, we maintain a consistent strategic direction. What do I mean by that? Despite different pace, our focus areas remain the same to optimize our oil and gas portfolio, to create high-value growth in renewables, to develop new market opportunities in low-carbon solutions. We were not among the companies that indicated lower oil and gas production towards 2030. On the contrary, we have continued to invest in oil and gas, and now we get more production growth from these investments. Also, we have always underlined that growth in renewables and low-carbon solutions will be value-driven. We do this to create shareholder value and attractive cash flows for the long run. The adjustment we make reflect that there are a few attractive business opportunities at the moment. We update our energy transition plan in times of change and volatility. But what is certain is that the world will need energy today and in the future. Power demand will grow significantly towards 2050. Global oil demand still grows and is expected above 100 million barrels per day through this decade. We also expect growth in gas demand. Global investments into clean energy are now higher than into fossil fuels, but we still see energy addition rather than energy transition. The global energy transition is progressing at uneven pace across regions and technologies. Growth in solar power and the use of electric cars are positive trends. On the other hand, we see headwinds for offshore wind and low-carbon hydrogen. Increased cost levels, supply chain challenges and delay in right framework conditions are part of the picture. When we update our energy transition plan, we are just for these trends. The energy transition has started, but the opportunity set for high-value growth is more limited than we had anticipated. Longer term, we see power from renewable and flexible sources and low carbon value chains as important parts of future energy system. For all scenarios, the energy transition must be balanced and financially sustainable. In the political context, uncertainty may not be a strong enough word. The institutions and collaboration we have relied on for decades are under pressure. In the energy trilemma, we have seen shift in focus from sustainability as the highest priority to more emphasis also on security and affordability. Due to the geopolitical tension, public spending on defense will increase, leaving less funding available for energy transition. The shift in focus is impacting the political frameworks we rely on to make long-term investments, again, affecting the pace of the transition. I will not go into politics, but the debate on electrification here in Norway is illustrating. Politicians set higher ambition for emissions reductions and put higher prices on CO2. Snøhvit Future will reduce CO2 emissions by approximately 850,000 tonnes per year and is already approved by the government. Still, it is highly debated project also in the parliament. For us, it's crucial to have stable frameworks both for oil and gas, for our electrification projects and in the buildup of new value chains. Today, we published the full version of our energy transition plan. It's about how we create value and pursue new business opportunities when energy markets change. The key ambitions have already been presented at our Capital Markets update in February. Our approach to the energy transition remain value-driven and balanced. In the energy transition plan, we reaffirm our ambition to cut our own emissions by 50% by 2030. Even as we continue to grow production, we remain on track. We have already cut 34% from 2015 until today and maintain our industry-leading position on producing with low greenhouse gas intensity. With low carbon solutions, we uphold our ambition for transport and storage capacity of 30 million to 50 million tonnes of CO2 per year by 2035. In renewables, we reduced our ambition for growth to 10 to 12 gigawatts in 2030, including our share of the capacity of Orsted and Scatec. To underline that the value creation is at the core of our decision making, we decided to remove the ambition for gross CapEx to renewables and low carbon solutions for 2030, and to reflect increased uncertainty and the reduction in expected growth from renewables, we have added a range for our net carbon intensity reduction ambitions. 15 to 20 by 2030 and 30 to 40 by 2035. Our strategic direction remains the same. We continue to reduce emissions and build profitable business in renewables and low-carbon solutions towards our net zero ambition in 2050. Equinor has a world-class oil and gas portfolio. We are a leading company in the industry with low greenhouse gas emissions. If somebody would ask me today, which graph is I'm most proud of, it will be this one. In short, growing production and cutting emissions. Cutting emissions, it's first and foremost, something we do to stay competitive to illustrate. Without the measures we have implemented since 2005 to reduce emissions, we will have to pay nearly USD 4 billion more in CO2 costs over the next 6 years. In 2024, our upstream CO2 intensity was 6.2 kilo per barrels of oil equivalent, well below half of the industry average. Our methane intensity is close to 0, backed up by robust monitoring. For upstream flaring, our results are more than 10x lower than industry average. Reducing emissions is about making sound business decisions for safe and cost-efficient operations. Methane is the greenhouse gas and a safety hazard. Emitting CO2 is expensive and reduces the amount of gas we can sell. In short, cutting emissions, lower costs, reduce risks, increase resilience and strengthen the value creation. Technology has been part of our DNA since Day 1 in this company. Through technology, we have unlocked the resources on the Norwegian continental shelf and created superior value for society and shareholders. Leadership in technology is our industrial legacy and the basis for future progress and value creation. On the Norwegian continental shelf, carbon taxes were introduced in the early 1990s creating a direct link between emissions and operating costs. It might surprise you that the first platform to be electrified using power from shore was Troll A all way back in 1996. Last year, we partially electrify the Troll B and C platforms. And this happened the same year as we delivered the highest gas production from the Troll field ever. Technology and innovation have also enabled us to enter new value chains. 1996 was also the year where we, as the first company separated CO2 offshore and stored it safely in the subsurface at Sleipner. Later came similar operation at Snohvit. Our experience has enabled us to build a new market for transport and storage of CO2 for industrial customers in Europe. Northern Light is ready to receive CO2, and we start later this year. New projects will follow in the coming years, and Jannicke will cover this in more details. There are many examples of how we use technology and innovation to unlock value. We have a pipeline of projects that will make difference in the energy transition. We have a broad opportunity set with renewables and low-carbon solutions ahead of us. We are committed and we are very well positioned. So thank you very much, and then I would like to hand over to Jannicke that will go into a little more details on the energy transition plan, our portfolio. So Jannicke, please welcome.

Thank you, Anders, and really great to see you all. Our energy transition plan is our action plan. It reflects our strategy and also provide direction. And today, I will present how our plan will create value today and in the future and positioning us on a strong pathway towards net zero. Safety, security and sustainability are key business enablers and integrated into everything we do. They are our license to operate and key to succeed in the transition. As we transition, we will maintain a strong focus on the safety of our people, protecting all our assets and safeguarding the environment. Last year, we had the best safety result ever in the company with a serious incident frequency of 0.3 and a total recordable injury frequency of 2.3. While I really take pride in this improvement that we see across the company, we also see that our work will never end. The tragic SAR helicopter accident last year, where we lost a dear colleague is a strong reminder of this. It requires a continuous effort to make sure all our people and assets are safe every day. Preventing major accident and security incidents is also important for the energy security. Equinor gas supply has become vital for Europe. And being a trusted energy provider is a role we take very seriously. To safeguard people delivering energy and ensure our Just Transition for nature and people. We depend on collaboration across the value chain. Continuing our strong performance on safety, security and sustainability will drive value creation for shareholders and also support our strategic direction. As Anders has already mentioned, we are well positioned to execute on our strategy. From our oil and gas business, we expect to deliver a strong annual cash flow from operations of around $20 billion after tax through 2035. And since 2015, we have cut our annual emission by 5.6 million tonnes. And this demonstrates that we can reduce emission while increasing production and thereby creating value in the transition. Energy efficiency has been a significant contribution along with portfolio changes and electrification of fields. In Equinor, we have a culture of continuous improvements and also an eagerness to develop new technologies. This enabled us to identify and implement effective solutions to reduce our emissions. One example, Bacalhau you saw it in the film earlier today and also Raia that we will have in Brazil. On this installation, we are pioneering the use of combined cycle gas turbines on these 2 FPSO. In 2024, we implemented several reduction initiatives across our portfolio. And together, these have reduced emission with over 200,000 tonnes from energy efficiency and more than 550,000 tonnes from electrification. And this result in a saving of more than NOK 1 billion in OpEx in 2024 due to the avoided CO2 cost. Electrification of oil and gas installation is one of the most important emission reduction measures that we have in Norway. And we do depend on continued support from the government to continue on electrification on the Norwegian continental shelf and onshore. To the right you can see our electrification portfolio on the Norwegian continental shelf and also the maturity of these projects. When Gudrun and Sleipner were electrified in 2024, all installation on the Utsira High has received power from onshore and together, a saving emission of around 1.2 million tonnes of CO2 per year. We do have pipeline of projects, and we are on track to achieve our net 50% reduction in CO2 emission by 2030. Through our financial framework, we are focusing over on value over volume and also maintaining robustness to lower prices. Our strong commitment to carbon efficiency minimize operational costs and prepare us for higher carbon taxes in the future. Most of our production is already subject to carbon costs. In regions without this, we apply in our investment analysis an internal carbon cost of at least $92, which is rising to $180 by 2030. We do have a very attractive oil and gas portfolio and key projects coming on stream in the next 10 years have a low breakeven, have a very short payback time, have a low unit production cost and also low CO2 intensity. By combining our both oil and gas portfolio with high value growth in renewable and low-carbon solutions, we will be able to create value in many different scenarios. Our portfolio breakeven point is below the 2030 price forecast in all IEA, world economic outlook scenarios including the net zero scenario. Each year, we stress test our portfolio against these scenarios by replacing our price assumption with those assumptions IEA are using. And the result of this, you could see on the right side is also showing the impact of the net present value in the different scenarios, but you can also see that we are creating values in all scenarios. The net zero scenario are representing sort of the largest potential of a downside due to their assumption of a very steep drop in oil and gas prices. In these stress tests, we do not perform any portfolio adjustments. But in reality, if the oil and gas pricing was dropping, we would, of course, adjust and optimize our portfolio. Our CapEx flexibility is also significant. And already from 2027, more than 50% of our CapEx is non-sanctioned. We operate most of our field ourselves and also that gives us flexibility to adjust when needed. Overall, we are confident that our high-quality cost competitive and low emission project portfolio are positioning us very well for market and also for regulatory changes. And we are also well positioned to speed up our transition when and where we see opportunities for value creation. We have created value in all the different phases that the renewable industry have been through. We entered offshore win early to ensure access at low cost for over 3 projects that we now have in execution. And by staying disciplined in a heated market, we avoid overpaying for leases and capitalize on the market condition by farming down in that period, and this resulted in a $2 billion in capital gains. To adapt to changing market and strengthening return on investments, we have taken actions to position us for long-term value creation. As Anders mentioned, we have adjusted our 2030 ambition to 10 to 12 gigawatts installed capacity. We are reducing organic CapEx by 50% for the period 2025 to '27. And we have high-graded order portfolio, taking down early phase and business development activity, reducing OpEx and SG&A by 20%. This improves our capital efficiency. And by remaining disciplined, we can focus on return dividend growth in key markets. In future energy system, we believe that offshore win will play a key role. That's why we have built a gigawatt scale renewable portfolio and pipeline targeting double-digit returns. To scale efficiently, we will use our expertise from the oil and gas sector. With these 3 mega projects in execution phase, we have all-time high activity level. With Dogger Bank and Power Wind 1, Baltyk II and III, we will install more than 300 turbines. We will lay more than 2,000 kilometers of cables, and we will generate almost 6 gigawatt capacity. Once completed, Dogger Bank will be the world's largest offshore wind farm. And together, these 3 projects will power 9 million homes. We do expect a double-digit return on capital from our investments in renewable and low carbon solutions, and we will remain value driven. We see new market opportunities in the energy transition, starting from a position of strength. We have already safely stored near 30 million tonnes CO2 on Sleipner and Snohvit. And by using our expertise as a competitive advantage, we can build an industrial-scale carbon storage business that will create value and also generate long-term cash flow. By 2035, we aim to transport and store 30 to 50 million tonnes CO2 per year. And in 2024, we made significant progress. We secured 4 new license on NCS. We obtained 1 onshore license in Denmark, Northern Light is ready to start receiving CO2, and we have also finalized investment decision for the Northern Endurance Partnership CCS project and the Net Zero Teesside project in U.K. with BP. The CO2 Highway Europe project will span 1,000 kilometers from the continent to NCS, with the capacity to transport 20 million to 30 million tonnes per year. Our portfolio is now exceeding the storage capacity of 60 million tonnes per year. And this is much more than Norway annual emission. For Europe's hard-to-abate industry, such as steel, concrete and chemicals, CCS can enable large scale of decarbonization. To undertake this multimillion euro project and deliver strong return, we do depend on government support and partnership, stable regulatory and fiscal framework and a long-term binding customer contracts. Together, we can build the foundation for the next generation of business. In our energy transition plan, we bring more detail on the building blocks towards achieving net zero. To track progress, we have developed a net carbon intensity metrics that address both Scope 1, 2 and 3 as well as the need for energy supply. This year, we introduced our range for our ambition to reflect the need for flexibility. And given the uncertainty that we see in the pace of the transition and also due to the adjustment in our renewable ambition. The waterfall here is also illustrating clearly that scaling of renewable and CCS are key. The waterfall is also showing the illustration of the disciplined contribution on how to reach our carbon intensity on 30% to 40% by 2035. Our strategy provides flexibility so that we, together, can execute on our strategy efficiently and also in the ambitions that we have as part of the energy transition plan. We will optimize oil and gas by increasing the energy production while lowering the emission, and we will develop renewable by maintaining a disciplined approach, and we will actively seek opportunities to build resilient business in the low-carbon solution. With the flexibility that we adapt -- we see, we can also adapt of the portfolio to new opportunity and new markets development. And we can drive value creation for shareholders and progress on our strategy. Since we launched the energy transition plan back in 2022, Equinor have made -- has made significant contribution and good progress. And we do support the goals of the Paris agreement by, firstly, reducing our own emissions, Scope 1 and 2, aligned with 1.5 Celsius scientific-based trajectories. And secondly, by investing significantly in renewable and low-carbon solution; and thirdly, by stress testing our portfolio to remain resilient in the future also for scenarios that meet the Paris agreement. Equinor has demonstrated leadership over the last years. And I would like to share some example that I'm proud of. We have an industry-leading position in carbon efficient oil and gas production. We established a world first floating wind farm. We started execution of 3 mega projects for offshore wind. We have sanctioned the world's first gas fired power plant with carbon capture and together with partners, opened the Northern Light, the world's first cross-border, CO2, transport and storage facility. Our strategy ensure flexibility in capital allocation and is allowing us to pursue the right project at the right time. We will stay true to our values in the company and also upholding high standards on safety, security, sustainability and integrity, and we will report openly on our progress. By building on this strong foundation around all these business enablers, we will create a solid basis for growth of the company. And as I stated in the beginning, our energy transition plan is designed to create value today and in the future and is positioning us strongly on our pathway to net zero. So thank you. and Bård and Anders, please welcome me for the Q&A.

Thank you, Jannicke, and thank you, Anders, for your presentations. We are then ready to start the Q&A. [Operator Instructions] I think we'll start with Tom Erik Kristiansen in Pareto, and you will get a microphone.

You mentioned the political change in many places and focus as well. Where have you seen specific examples yet? And where do you expect to see more? Is it the carbon capture business that is most exposed to this long term?

When I mentioned on the political changes, we have seen, for instance, how the taxes in U.K. for oil and gas changed 3 to 4x with the previous government and today's government. We have seen how the support for electrification have some changes here on the Norwegian continent shelf and we also see the change the previous administration and today's administration in U.S. regarding the offshore wind segment. So we see this in different countries. When it comes to CCS, I would say that we have actually seen, particularly in Europe, a positive development in the regulatory framework. Remember, a few years ago, it was illegal in Germany. And now it's a technology they really want to use. We see the development in Denmark and so on. So particularly here, we see positive trends, but it's the cost level and the inflation we need more customers to ensure that we can move this technology forward.

One more question, please. On the capacity targets for 2030, there is still some projects to be added to reach those. Do you think it's most likely that, that will come through organic growth or that you see things in the market at prices that are cheaper and where you can build it yourself?

Well, we also we have a portfolio of onshore in our portfolio of projects that might come -- be sanctioned. They have a very short cycle time. So that is one possibility. We are always opportunistic in the market if we see that we're able to create more value from inorganic than organic. So I think we will use the whole toolbox there. The important thing is that to reach that ambition, it's about how do we create value moving to that. So it's not about reaching the ambition. It's about having that as a guiding start to kind of really look how we can find the best possible projects to invest in and when we have good projects, even make them better.

The next one on my list is Arild Skedsmo over there from KLP.

Thank you, and thank you for a clear presentation. We appreciate. As always, the low production emissions that you present. And I think also should emphasize the effort you're doing on the methane side that is really important industry-wide. Because in this report, even more clarity on how you are going to achieve the production emission targets. So that's good. What I miss is a bit of the same clarity with regards to the net zero target. A couple of questions there. I think you know we have been asking for absolute reduction targets before. And I think what we see now with shifting political wins and all the uncertainty that you present in the figures show that, that would give perhaps more clarity on that direction. So if this is something you have considered providing absolute emission reduction targets? And the second related question is how you talk about the Paris agreement and alignment or how you relate to it? It used to be in your '22 report, I think you used the words consistent with the Paris agreement and now it's more compatible with the agreement. And should we understand that as a sort of a less strong commitment to the targets of the Paris agreement?

Thank you. And thank you for recognizing the emission reduction and particularly on methane. This is something that we also work with other companies as a member of OGCI and also the oil and gas decarbonization charter outcome of COP 28 where companies like us work with other companies that used to not have a baseline and not targets and now are moving into setting targets, improving and so on. And this demonstrates that the industry when we work together, we can actually make an impact. Your question, if I understand it correctly, it's about absolute emission target for the total Scope 1, 2 entry. We have -- we are consistent in what we said in 2022 and what we say also now in this 2025 update. We have an absolute emission reduction regarding Scope 1 and 2. This is our responsibility, this is our emissions. And this is where, as we demonstrated, we focused to ensure that we are able to create both value and reduce our emissions, meaning that is where we focus on the absolute emission target, which is we're keeping it to 50%, as we have said before. And I think also Jannicke demonstrated the progress we have made since we had the plan out in 2022. So it's kind of -- when it comes to absolute emission target, we have the same philosophy as we had last update. When the Paris alignment (sic) [ Agreement ] -- we have also the same focus. It's about how we take responsibility for our -- first of all, there is no kind of framework for companies like us in this, which is consistent across the industry. Paris Agreement is 4 countries. But we have always focused on how we can be consistent and work according to the Paris Agreement by reducing our own emissions at the same time, be a part of how other industry can reduce their emissions. So that's why, as Jannicke said earlier today, it's about reducing Scope 1 and 2 is about investing profitable into renewables and low carbon solutions, enabling our existing customers and others to reduce their own mission. And then we also demonstrate to you our sensitivity to lower oil and gas prices, according to net zero scenarios. This in totality demonstrates that our strategy and the way we conduct the industry is consistent with the goals of the Paris Agreement, but not according to the same standards that countries are exposed to. Anything you would like to add there, Jannicke.

Yes. On the last part, I can just add to our commitment related to support of the Paris Agreement is exactly the same. But of course, this is [ 10 ] years back and you will find a lot of different wordings all through the documents, but by no mean is the change in the ambition level. So that's one of the reason. And I just wanted also to add since you gave good feedback also on and overall to produce oil and gas with low emission, the methane and the CO2. And we've been focused on that over many years. And we also see that we have a role to play to push our partners. We also have a role to play related to the oil and gas decarbonization charter. And since you asked -- mentioned this, I just want also to mention because yesterday, actually, there was 90 people gather in the oil and gas decarbonization charter, where we are sharing experience from our side. And with a lot of curiosity from countries, Nigeria, Brazil, Malaysia, Egypt, NOCs in those countries to see what we have done and what can they pick up on. So even though we have, of course, most of our focus on our own emission, we try to at least share our knowledge and also try to help other companies to move on.

We will do a couple of more here in the room, and then we will do some from the webcast and can revert to the room if there are more questions. The next one on my list is Anders Rosenlund from SEB.

You talked about value-driven energy transition, at least that's what I heard. And in order to at least convince parts of the market, you need to be able to report on that as well. And one of the big challenges in your story seems to be that it's very, very difficult to sit on the outside and appreciate the alleged value creation that you do, given your very, very thin reporting on these matters. And I haven't read the entire 337 pages of the annual report yet, but I've flipped through it, and it's very difficult to see the objective figures showing the value creation in particular in the renewable segment. So don't you -- how to frame this as a question. Do you have any plans providing better transparency, allowing investors to acknowledge that it's actually value creative, what you're doing because there seems to be some doubts out there.

Thank you. And yes, as you said, all our investments needs to be value driven. It's about creating value for our shareholders in short term and long term. And I think I just want to kind of show 2024 results, industry-leading ROACE of 21%. And as I said, we also see that we will have industry-leading ROACE towards 2020 -- 2030 as well above 15%. Of course, we are in the investment phase of renewals and low carbon solutions now. You will see that so far, the cash flow from this is thin, but you think increasing. But we have been very consistent saying that we want to have for all investments we do in renewables and low-carbon solutions. We had double-digit returns on equity on a nominal basis. And we have had so, we showed you that we have had that at the capital market update for the existing portfolio of fields in production on a portfolio basis. And we also provided earlier some projects. So this is where constant focus, making sure that investment decision will have the necessary return, double-digit return on equity, demonstrating that in ROACE will be industry-leading for the totality of the company. Yes, we will constantly develop how we are presenting the value creation of this company and also segment wise as we go along. But we have to come back to that at a later stage.

Thank you. Then I have in the back, Jan Erik Saugestad from Storebrand.

Thank you, both, for very clear presentations. Anders, you mentioned renewables as an energy addition as opposed to an element in the energy transition if I heard you correctly. Do you think the drive for energy security will actually speed up the transition and renewables? And do you regard that as an opportunity or a threat?

I think it will vary from regions to regions. I think in Europe, we will constantly see renewables be seen as a tool to create energy security in the region, which clearly creates an opportunity for us. While in the U.S. at the moment, we see that renewables are seen to be too expensive, particularly kind of will create a lot of grid updates that will be too expensive for consumers, where other types of energy forms will kind of be more seen as energy security, particularly gas to create electricity. So I think we will see variation in different parts of the world, which create different business opportunities in different parts of the world. And then it's all about for us to make sure that we are positioned well in those regions that we want to compete, and compete there, what gives us the necessary return and also where we have the competence and capabilities to compete. I would say we see that U.K. continue to want offshore wind. We are well positioned with Sheringham Shoak and Dudgeon, there are extension possibilities. We have Dogger Bank A, B and C and then potential D and so on. And with U.K. focus and the increased strike price that are indicating that is quite clearly an opportunity. And then we will have to balance that with the cost and see that the return is necessary. What you probably saw what we did in U.S. last year, we got the opportunity to increase our gas production. We anticipated that the gas demand in U.S. would increase and then divesting in some countries and investing in U.S. East area such that we are enabling for the kind of increased gas demand in that area. And that's how we kind of see opportunities in different parts of the world. So the strategic direction for us is from. At the same time, with changing politics, frameworks, business opportunities will come and arise in that respect.

We will take some questions from the webcast. And the first question Will Farhan from Federated Hermes. So Will, the microphone is open.

Previously, you've cited in your -- in previous year's of reporting that your breakeven price on the fossil fuel side of the business has been $35 a barrel. And we've seen in the last capital markets update that, that has increased to $40 a barrel. So two questions really. One is, is that driven by the international portfolio and how confident are you of the cost competitiveness and resilience of pipeline oil and gas projects, particularly how sensitive the returns could be through uncertain energy transition scenarios?

Yes. So below $40 is what we say. And you're absolutely right. It has increased slightly over the last year, also reflecting the inflation and the cost pressure in the industry, the increased investment levels in oil and gas, which is causing specific increases in equipment for developing new project. That is what we see across the board. But of course, the lowest breakeven is still on the Norwegian continental shelf because this is where we have a lot of subsea tiebacks already invested in the host, et cetera. But we also see kind of that we work really hard on our investments in all parts of the business, including the international to make sure that we are able to keep the robustness of our oil and gas portfolio as low as possible. So in many ways, you can say independently of hydrogen potential project or CCS project, oil and gas project, renewable projects. We constantly work to see how are we able to lower the cost work with suppliers in a different way, bringing the suppliers in earlier to bring their technology into the planning phase to see how we are able to keep the robustness as high as possible in all parts of our projects. I didn't really catch the last question.

I think it was related to your conviction about the resilience of the portfolio also in scenarios...

And I think Jannicke demonstrated it one of the slides there with a very, very short buyback that has not changed. Some of the projects on the Norwegian continental shelf have a payback time less than 1.5 years. Our increased oil and gas wells even shorter. And including the international portfolio, it's 2.5 years and below $40. So I'm absolutely sure that we have a very, very robust oil and gas portfolio, but it's also robust in terms of very low CO2 emissions. So even on the international business, we see levels now similar to the Norwegian continental shelf when it comes to the CO2 emission. We don't have CO2 tax there, but at least we are very, very robust for potential CO2 taxes if it should come.

We'll take the next question from Jason Gabelman from TD Cowen.

I thought you made an interesting comment about the -- I think it was $6 billion of avoided cost -- sorry, $4 billion of avoided costs over 6 years from the emissions reduction you're doing. And as it relates to measuring returns on these projects, is the right framework to use the returns on these renewable projects on a stand-alone basis? Or should we really be looking at returns on these projects based on avoided cost of emissions you would incur?

Okay. Thank you. To be very clear, when I talked about this $4 billion over the next years. That was in the oil and gas business, where on the Norwegian continental shelf, we pay a CO2 tax. Half of it roughly is to European ETFs -- EU taxes, and the rest is Norwegian CO2 tax. So by reducing the CO2 emission while producing the oil and gas on the Norwegian continental shelf, we don't have -- and using power from shore, we don't have to pay that tax. So if we hadn't done any measures about reducing CO2 while producing from 2005 until now for the last 20 years, the OpEx on the Norwegian continental shelf over the next 6 years would have been $4 billion higher. So that means that we don't include any of this into any renewable project. They will be on a stand-alone basis, based on the internal rate of returns for these type of projects.

The next one is from Xander Urbach from MN Investors.

Two questions, if I could. So in the first question, in your annual report, you also gave that flow chart that you provided until 2035. We also do so for 2030. And you reserve a really, I think, 50% of that reduction for the other category and other could include carbon credits. It could include nonenergy use of oil products, for example, which is already rebased, I would assume that's already happening and unknown opportunities. So what do we expect from this category, right? So should we prepare for massive carbon credits in your balance sheet by 2030? And second question, maybe going back to the value-driven proposal on renewables. And I quite agree with the comments made earlier about transparency, but maybe seeing it from a different perspective, kind of what did you learn about these projects in the last couple of years about driving that value? And what will you then -- what are you doing differently now? And what will you be doing differently in the coming years to get to that return level and also then have that shown through in the numbers?

Okay. Thank you. I'll start working on the -- answering the renewable. And if you prepare the other question, Jannicke. So I think on the renewable side, what have we learned? First of all, we were very early into the renewable business. And this enabled us to actually get seabed leases at a very, very low cost. And at the same time, during that period, we saw that the industry came with new solutions for the VTGs higher capacity year-by-year, project by project. And based on this, we saw the levelized cost of energy really kind of falling down, enabling more and more bidding and bidding up the prices for seabed leases and also for lower strike prices and so on. We decided not to take part in the increase in the auction for seabed leases. I think that is the first learning. We saw that this went too high to give us the necessary return. So we avoided winning in the U.K. around 4, U.S. [ bite ] auction and the Norwegian auction here at Sørlige Nordsjø and also in the expensive German auction. So that was the kind of the first learning. When kind of everyone went in and got too expensive, we stayed away. The second learning is that during this period, I think the supplier industry actually kind of took 2 big bite. They developed technology too fast, never been able to standardize, do good manufacturing, enabling good maintenance. And we saw quality issues. We saw a new capacity on the Marine coming into late be delayed, which caused kind of delays and so on. And we have been able to stay away from that in many ways, but we are experiencing delays in commissioning on the Dogger Bank now, which is also due to kind of new technology, et cetera. I think this industry, which is a young industry, will improve. We will see more standardized marine vessels. We will see more standardized turbines, and we will see higher performance. And eventually, we will see the levelized cost of energy go down again. But we also see that governments are realizing this, and we see that they are willing to pay a higher strike price to enable more offshore wind into their energy mix. So it's -- we have to kind of, as an industry, learn all of this specific for us. We have been a part of the -- and seen the cost increase putting pressure on returns. But then we have used all our capabilities for project execution from oil and gas and really use that into our portfolio. So a lot of learning that we bring with us going forward to ensure that we, over time, constantly improve the offshore wind business.

The first question you had was related to the other, which is, as you alluded to also, the carbon and also -- but it's also the petrochemical. We have not done any changes on a view how much offset will we use in our portfolio. So we have said since we launched this back in 2022, when we said that was Scope 1 and 2, we reduced with 50%. We said it could be a maximum 10% of the totality, meaning 5% in the 50%. So no changes. We saw yesterday that there was some changes in the curves that are in the printed version. So -- but please remember, this is shaded. So it's not like exact figure that on that box orders, we have no other plans than what we had before. So it's the same plans in this area.

We will do one more for the webcast, and then we'll revert to the room for a couple of questions, and then I have a couple of written questions as well. The next one is, Tsitsi Griffiths, from Federated Hermes.

Appreciate the presentation. It's been very helpful. I think some of my questions just relate to some clarity around some of the reporting. So when we look at the information given on the oil and gas portfolio in terms of the oil and gas production, and then the associated reductions in net Scope 1 and 2 greenhouse gas emissions. For the oil and gas, we're seeing that this is reported on an equity basis. And in terms of the CO2 emissions, this is reported on an operated basis. So I think the clarity we're looking for is that why is it inconsistent in terms of how you're accounting for these 2 metrics? And how are you closing that gap?

Yes. So when we -- you're right, when it comes to production, it is equity, and it's an industry standard to report the Scope 1 and 2 emission on the operated basis because this is where we can influence the emission where we can actually use our operational control to drive improvements. But when you come to the net carbon intensity, then also equity is included in both Scope 1, 2 and 3.

I could just add that on our website, it's a very detailed explanation of the net carbon intensity where hopefully, any kind of questions related to that has been answered. At least we have tried. And if it doesn't give the answer, please reach out and we will do an update.

Next one, we will take one here in the room and on my list it's Bård Bringedal.

Yes. I guess you touched upon this earlier on renewables. We've seen some of your global peers stepping down on their commitments, specifically on renewables as well. And given your experience and the financial outlooks for these projects, what are your competitive advantage in terms of running renewable projects? Is it credible that traditional oil and gas companies actually are the ones running these projects? I think the [ IEA ] said that it's roughly 1% of the renewables these days that's actually been run by oil majors.

Yes, particularly because most oil and gas companies are not necessarily in onshore and the kind of the large development of solar. Yes, I think we have kind of a good knowledge to run these type of projects, and we are well positioned. I think the challenges we have seen in the offshore wind is not specific to previous oil and gas companies running offshore wind projects. I think this is an industry-wide challenge that we see from kind of all industry players, including those that were kind of first movers into this industry. So I think this is about improving. And I think we have a lot of experience for actually how we work together with the supplier industry improving our business. This is exactly what we did in 2014 when the oil price went really down where we work together with the suppliers to see how are we able to kind of bring down the breakevens using new technologies, working in different ways, standardized, et cetera. This is also what this industry is doing now. And I think the turbine makers kind of really appreciate working with a company like us in this effort. So I think definitely, we have something to do there. As I said earlier, this is a very young industry. We expect to see improvements in this industry. We are well positioned. At the same time, we don't have any projects that we won with huge cost or any commitments to deliver within a certain time. So we have the flexibility to utilize the improvements in this industry when that improves. And I think that's -- that we never get carried away to put a lot of money on the table for seabed leases, enables that we can be really kind of have a fresh continued curve on improving our offshore wind portfolio with time.

If I could just build a little bit on Anders because some years back, people asked us that will we be able to run sort of the oil and gas stream in the very sort of late phase of the project? And we established the FLX organization moved some of the field like Statoil Gina Krog and that really changed the way we are working with those field, creating massive value now compared to before. And also that kind of way of working with suppliers, the way we are working to really reduce the OpEx and CapEx and all other projects. We are also now transferring to REN organization. We're actually also moving people to make sure that the way of working really is changing. And we do have a culture for continuous improvement and also using technology. And I think that's also an advantage that we will take with us to renewables.

Then I have Marianne Bruvoll from Nordea in the back there in the middle -- in the back.

Thank you for an interesting presentation. So, so far, in addition to the decarbonization part of your plan, Jannicke, you mentioned that you're also concerned for safeguarding the environment and also a Just Transition for people in nature. Can you say a few words about what you're doing to establish the framework and also, I guess, have for the different business areas in your portfolio to actually establish the baseline and targets on the nature and biodiversity and also kind of setting a cost of nature. And also, how do you foresee that this will impact the investment decisions in the future as you have now included the cost of carbon in your investment decisions.

Good questions. And what we are doing or have been doing and are doing is for each field that we have in operation or project for things that will come in operation. We do assessment. So we review the situation, and we also do assessment and see what can we do to improve. And for also some of our projects, we see how we can have a positive impact, and that's not easy. We have reached such ongoing to see to get a bid also with the [indiscernible] and others to see how can we calculate. So if we are removing some freeze, what kind of value should we put on that? And what can we do in addition to have a positive impact on nature. So we have so far not included this economically as part of decision-making, but we are in progress to see how can we put value because we would like to have a positive impact in nature in the future. But this is -- yes, we don't have the answer. Nobody has the answers. I think together, all companies are trying to do this, but what we do is to do an assessment upfront. And when the project is finished, we do an assessment in the end to see what's the delta and what can we do to make a difference. And of course, the most important part is to do the assessment upfront to decide what can you do to have a more neutral effect on the nature. So thank you.

Thank you. I have a few questions in writing. So I'll take to there now. The first one is from Dominik Varga from Erste Asset Management, and it is what is Equinor's strategy to limit Scope 3 emissions until 2050. Eventually, this would mean to scale back production.

Well, we don't have a strategy to scale back production. But we have a strategy to a balanced energy transition where we constantly want to improve how we produce oil and gas. We believe that eventually, the demand for oil and gas will be lower, meaning that at one point in time, but I don't know when, there will be also less production from our portfolio. But that is more kind of related to the kind of opportunity set on the Norwegian continental shelf far into the future. The important thing for us is to make sure that we are also profitable, investing also in renewables and low-carbon solutions, particularly like CCS, which would also offset some of the Scope 3 emissions that we are -- our customers are emitting while they're using our products. So we will continue optimizing our oil and gas portfolio where we will continue to invest in renewables and also develop new opportunities in low carbon solutions. And in totality, you will see over time that our net carbon intensity will decrease.

The next one, Henry Repard from DNB Asset Management. Regarding your net carbon intensity reduction target, can you confirm whether Equinor includes all CO2 capture through its CCS as a service in the NCI numerator regardless of the emission source or only CO2 captures from emissions that originated from Equinor produced energy projects. So can you confirm that the both include CCS from a service in addition to storing from own operations. And then additionally, how do we ensure transparency in differentiating between the two.

No, the first is yes. In addition -- yes. We tried the transparency, I tried to explain that in my speech as well that we will try to be transparent in all of this. We will report -- and we will do our utmost to really show all these figures. We have no plan to hide anything on this. But the answer here is...

If I understand the question correctly, it's CCS that we do as a service, it's included. When it comes to the CCS, we store from our own operation actually it's not emitted. So it's not included into it, our emissions for production. And -- but the details there about the volumes, we will have to come back to.

Yes. There is also a very detailed methodology descriptions available on equinor.com, so if you want to go into further detail, you can read that there. Then returning to the room, I have a question here on the table #1 in the middle here.

[ Christian Griffin ], Danske Bank. Regarding still the carbon intensity reduction target. You have a target of 15% to 20% by 2030. And then since -- with the 2019 baseline and then you achieved 2% reduction in the last 5 years. So you'd require almost 10x acceleration in your net intensity reduction over the next 5-year period? Can you break down a little bit how you plan to achieve this acceleration?

Yes. And this acceleration is also based on investment already made while not necessarily the power production is now kind of ready to produce like Dogger Bank. Dogger Bank is in investment phase. And we are ramping up production meaning that a lot of the work is already done, and the ramp-up for that project will go fairly rapidly. Same will happen for Empire and Baltyk. So it's not like the first years, as you referred to, it goes very slow with 2%. Now we will accelerate it because we have worked over the last years to actually execute on these projects, including also the Northern Light Phase 1, which is ready as soon as the CO2 will arrive and we will start storing it, you will see that type of acceleration. Same also for some of the onshore projects that we are developing shorter cycle, they will also come into production. And that's why you see the acceleration. So it's actually some of the investments done over the last 5 years that now will come with production of power and CO2 storage and that's why we have a little bit more acceleration than we had the previous years. And this is also reflecting that if you go back to 2020, only 4% of our investments were -- comes outside the oil and gas. And we have increased it over the years. And now you will see effect of it over the coming years.

So it's a combination of the renewable portfolio in CCS that will...

Yes.

Am I able to ask one more question?

Yes, please?

Regarding a bit more biodiversity and the cost, but maybe more on the investment side. We've seen over the last couple of years that nonprice criteria have become more important to win offshore wind projects. How do you see your ability to compete on that side of tender offers?

Yes. So as soon as a nonprice that means that you take -- you will be a merchant on the market risk. At the same time, you're still exposed to the cost exposure of developing the offshore wind park. We have seen that some of these projects that comes on these terms are still challenging. So we have decided not to lean too much forward in some of those -- in those projects. We will continue evaluating them. It's about building a broader portfolio of power such that you're able to deliver kind of a firm power production to your customers, enabling also investments in different parts of the portfolio with the offshore wind into that type of auctions. So I think it's a little bit of the same story as we've seen for those auctions that you pay for leases, it's still not necessarily higher returns, although you get the leases for other kind of types of commitments.

If I could just add on sort of the more safety security matters that they ask for typically the auctions on the safety part, we have good results and positive feedback and also within renewables, we do have a 50% reduction target or ambition level for 2040, not '50. So we have a little bit different targets for REN portfolio compared to the full business because of lease auction is asking for that. Same with circularity and waste treatment and so on. So we are meeting those goals. But as Anders said, some of them have a different cost level than what we would be willing to, but we are definitely competing very well on the sustainability parameters.

Good. I have a few more in the room. We'll see how many we managed to cover before we are out on time. But the next one is you, Arild Skedsmo from KLP.

Back to the $4 billion savings in avoided carbon costs. Just curious, if there are costs with conversions that you have to pay for electricity, et cetera. And is there a net saving under the Norwegian regime?

That is gross. So it's pretax savings? The calculation here is quite simple. What would CO2 -- how much higher would the CO2 taxes be if we emitted at the same level per barrel as we -- if we maintain the same emission -- emissions as we had in 2005. And by reducing it, we have saved around $4 billion for that time period. It is that number, purely that number. When we do calculations on the electrification projects and all the other energy efficiency projects, this is, of course, the income side and then you have a cost side, including the cost of electricity. But the criteria for us is that these projects needs to make economic sense, and that's what we have achieved so far.

And that's a positive in the Norwegian region.

Yes, the project that we have executed on electrification and emissions reductions. They are NPV -- that's a positive and such value creating and of course, reduces risk in our portfolio.

So every project that we have done is done on a stand-alone basis to kind of the increased gas production you can sell versus the cost and then the electricity prices, and you calculate the net present value and they are decided on the same basis as all of the type of projects. Due to the CO2 costs in Norway and increase in cost, they have always been NPV positive with the required returns for -- with a hurdle rate. And then this was an illustration of that. If we had the same kind of CO2 emission, carbon intensity today as we had in 2005, done nothing our cost level be in a total different level, and we would have to kind of make sure that we are able to kind of lower the cost level on other ways. So this is an illustration that all the investments we have done in electrification gives us a positive outcome on the OpEx and SG&A.

Anders Rosenlund, again, SEB.

Does nuclear have a place in your energy transition plan?

No.

It's like the internal town halls.

But you are invested in nuclear companies. So how come you invest in companies, which if it's not part of your plan?

What are you referring to then?

I'm referring to our Fusion investments.

Anders, Fusion is a venture investments, and it's quite different to the fusion technology. It's a total new technology and it's in the as -- to be investing in a technology that might be something. But if your question is about will we invest in nuclear plants or SMRs? The answer is no.

The last one on my list is Marianne Bruvoll from Nordea in the back.

Thank you. Moving back to decarbonization levers. So the challenges that we see in Norway around the grid and capacity expansion and your electrification of your assets, both offshore and onshore. Can you say a few words about the status and also the impact and mitigation that you have if, for example, Melkøya is not electrified according to plan?

Yes. Thank you. So of course, there is a debate about where should we use the electric power to decarbonize the oil and gas production or should it be used for other means? Or do we have the necessary growth in the power production in Norway to meet the demands and increased power demands. As I said in my speech earlier today, there has been kind of high political support for decarbonizing the oil and gas industry, driven by putting a high CO2 tax on the industry. We have followed this because, as I gave you in my previous answer, this gave net positive value and to be positive for all our projects, enabling us to actually now have a lower OpEx. We see now that -- and I think Jannicke illustrated in 1 of her slides that there are 3 more projects then we see -- we will reach the 50% ambitions. And we don't think any further electrifications will be worth while in terms of creating values because some of these installations will be retired over time, and we will have a consolidation of platforms in different clusters, enabling us to actually take out more value, longevity of the oil and gas production with less operational costs in the future. I see the debate on Melkøya, I appreciate that discussion. But as I said, it's very challenging for this industry when already approved sanctioned projects are challenged in the Parliament. That is totally new development in our industry. And I have -- yes, I think strongly that Melkøya will pass and be implemented. So I don't have to -- I don't think too much about what we need to do instead. But it might be pushed a little bit out in time because as you remember, from the governmental decision, we need to keep the gas turbines available in case of power shortage in that local county. So -- but we do expect a debate around the next 3 projects in terms of grid connections. And we need to take that into account when we work further. So far, what we have approved from the government is to do early investments in cables and kind of this long item -- the items you need to order in long time advance. So we are moving forward. We think we will get kind of positive outcome of this, but it's challenging, and we need to have the flexibility that this also could be changed.

Then we run out of time. I want to thank Anders and Jannicke, of course, and also everybody for participating both in the room and on the webcast. Thank you particularly for your engagement and your questions. That is highly appreciated. As always, the Investor Relations team remain available. So if there is any thing that you want to discuss in the follow-up or you have additional questions, you are always free to reach out to us. So with that, thank you very much, everybody, and have a good rest of the afternoon. Thank you.