OMV Petrom S.A. (SNP) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to OMV Petrom's Capital Markets Day organized with the purpose to share with you our strategic directions for 2030. Safety is our top priority, so may I start by stating that we have taken all of the required measures to ensure the protection of the people onsite at the studio, including testing. Please note that starting with January 1, 2022, OMV Petrom's business segments will be renamed as follows: Upstream will change to Exploration & Production; Downstream Oil to Refining & Marketing; and Downstream Gas to Gas & Power. Our strategy presentation already reflects these changes. This event will last approximately 2 hours. During the first hour, Christina Verchere, Chief Executive Officer and President of the Executive Board will give you details of our new strategic directions and targets. Alina Popa, our Chief Financial Officer and member of the Executive Board will present OMV Petrom's new financial frame. In the second part of the event, we will have a Q&A session when Christina and Alina will be joined by Christopher Veit, Executive Board Member responsible for Exploration and Production; Radu Caprau, Executive Board Member responsible for Refining and Marketing; and Franck Neel, Executive Board Member responsible for Gas and Power. If you want to ask a question, please register by using the raise hand function in Zoom during the presentation or the Q&A session. Today's presentation and script are available on our website in the Strategy section. I also draw your attention to the cautionary note regarding forward-looking statements at the beginning of the presentation. And now without further ado, let me hand over to Christina.

Good afternoon, ladies and gentlemen, and a warm welcome to our Strategy 2030 presentation. Today, we are embarking on a path to transform to a lower carbon future. This is our ambition, this is how we see the future of our company and with that our contribution to the future of Romania's energy sector. The future builds on an existing very solid foundation, our integrated business model, the traditional assets developed by our predecessors to whom we are respectfully grateful, our know-how as well as our key role in the Romanian economy are the groundwork of our strategy. We all see how fast the world is changing around us and it will continue to do so over the coming years. And yet, even in the midst of many uncertainties, we know this to be true; we will grow our business, provide more energy with less emissions, increase the rewards to our shareholders, help our customers decarbonize and we will make our employees proud to be part of this company. By doing all these, we are assuming a leading position in the energy transition across the region where we operate, and we will do our very best to live up to this ambition. We recognize climate change as one of the most important global challenges as well as opportunities of today, and we support the goals set forth by the Paris Climate Change Agreement. To this end, sustainability is fully embedded in our strategy. Our strategic ambition for 2030 is to lead the energy transition in Southeast Europe, capitalizing on opportunities in our emerging markets. Our objective is to secure sustainable long-term economic growth and generate healthy cash returns that will facilitate new investment and attractive shareholder returns. Romania is expected to remain one of the fastest-growing economies in Europe and we are well positioned to capture this growth. To do so, we will put forward the largest private investment plan in the Romanian energy sector totaling EUR 11 billion. Our purpose is to transform our company and support Romania in achieving its climate change objectives. By 2030, we target a 30% reduction in the carbon intensity of our operations compared to a 2019 baseline. Please note that we have elected to use 2019 as the benchmark to remove the impact of the COVID-19 pandemic crisis in our comparisons. We also intend to enlarge the share of natural gas in our hydrocarbon production to about 70% as we see natural gas as a key enabler for a successful energy transition in Romania. We will do this while increasing our investments in low and zero carbon solutions to cumulative EUR 3.7 billion. At the same time, thanks to our disciplined allocation of capital and by targeting to more than double our earnings, we will be able to offer our shareholders highly competitive growth in the base dividend and potentially special dividends along the way. To better understand our plans, let's have a look at the 3 complementary pillars of action on which our strategy is based, namely transition to low and zero carbon business, grow our regional gas portfolio and optimize our traditional business. Let me go into more detail. Firstly, transitioning to a low and zero carbon business means that we will innovate, develop and introduce new low emission products to generate value for our business. In terms of operations, we target being carbon neutral by 2050. This is an ambitious goal, which we are confident we can achieve in several steps. The first step sees us set intermediate targets for 2030 to reduce Scope 1 and 2 GHG emissions by approximately 30% compared to 2019. Secondly, we will grow our regional gas portfolio, which, as many of you know, is focused on the Black Sea. This pillar is mainly driven by Neptun Deep, which will deliver game-changing growth. This intertwines with the first pillar as it will also transform the oil-gas mix in our E&P portfolio. And finally, we will optimize our traditional business. We will focus on value over volume, realizing operational excellence across all business segments. In essence, we will capitalize on our integrated business model and ensure security of energy supply. Our strategy builds on our strong track record of implementing new projects, while maintaining a strong capital discipline and rewarding our shareholders. Our company has an enormous responsibility to all our stakeholders to implement measures to reduce our carbon footprint to position for a lower carbon future and to contribute to a successful energy transition in Romania and in the wider region in which we operate. We will achieve all of these by leveraging innovation and digitalization, operating responsibly and always keeping in focus our people and our communities. Now let's see what our company will look like in 2030. As economies move away from fossil fuels, a wide array of new technology solutions and business innovations are emerging. By 2030, we are targeting the addition of 5 new low carbon activities to our portfolio, renewable power generation, biofuels, alternative mobility, carbon capture and storage, and hydrogen. Combined, these will account for 15% of our 2030 Clean CCS EBIT and represent an estimated 35% of our cumulated CapEx. Regional gas growth, including our flagship project Neptun Deep, will generate 1/3 of our Clean CCS EBIT by 2030, but account for only 1/5 of our CapEx. By 2030, we expect that the cumulated investments allocated to our traditional assets to have decreased from nearly 100% to about 45%, while generating an estimated 50% of total Clean CCS EBIT in 2030. Our proposition to shareholders is clear: growth in investment, increasing profitability and dividends, all while securing a sustainable long-term business through our energy transition. We will maintain a disciplined capital approach, while investing close to EUR 11 billion and achieving a return on average capital employed of more than 12% in 2030. We target to more than double our Clean CCS EBIT in 2030 compared to 2020 and are confident that this will allow us to increase base dividends by 5% to 10% per annum over the decade, in line with profits. Sustainability remains at the core of our actions as mitigating climate change is a strategic priority for our business and we are committed to be part of the solution for the transition to cleaner energy. Our long-term goal is to achieve net zero operations by 2050. We target to reduce Scope 1 to 3 intensity emissions by about 20% compared to 2019. To help achieve this, we plan to invest approximately EUR 2 billion in innovation and new technologies, mainly in hydrogen and carbon capture and storage. In total, we expect that 1/3 of our cumulated investments will be into low and zero carbon new businesses. Let me pause now for a moment and share a short video, which captures our 2030 strategy for a lower carbon future. [Presentation]

Now let's look at the market context that underpins our new strategy. Romania's fast-growing economy is a key driver of energy demand and we are ready to capture this opportunity. According to the European Commission, Romania is forecast to experience average annual GDP growth rate of close to 4% during this decade, above other countries in our region and indeed the EU as a whole. In short, we all know that higher GDP growth means more disposable income, and with that, ever-increasing demand for energy. While the demand for energy is expected to rise, so too is the demand from our customers to decarbonize. The Fit for 55 package has opened a new chapter in the fight against climate change, setting new challenges for many industries and for society as a whole. At the same time, ensuring a stable and secure supply of energy remains a high priority on the global agenda. Consequently, to meet the needs of our developing economy, the Romanian energy sector must focus on transitioning to more sustainable solutions at a faster pace. Looking at the energy demand in Romania, we forecast a steady growth until 2030, supported by increasing electrification and mobility. Gas demand in Romania is expected to grow by 20% by 2030 compared to 2019. This growth is supported mainly by new gas-fired power generation capacities coming online as well as gradual increase in household demand, supported by governmental incentives for extended grid connections. All the while, industrial demand will decline gradually due to improved energy efficiency. Post 2030, domestic natural gas consumption is estimated to decrease as lower operating rates for gas-fired power plants are forecast, while the share of renewable sources in the electricity mix increases. However, in our view, gas will continue to play a key role in the Romanian energy system through 2040, with increasing demand for hydrogen production. Power demand is projected to increase by about 10% in 2030, driven by economic growth and electrification, mainly in transportation. Growth is projected to be strong until 2025 and then more moderate in the second half of the decade due to anticipated improvements in energy efficiency. In addition, the power generation mix will change, driven by a decrease in coal use and an increase in wind, solar and biomass capacities. Natural gas will be important in this mix playing a critical role in mitigating the volatility of renewable capacities. It will also compensate for a lower share of coal and nuclear power generation in the second half of the decade due to refurbishment of a nuclear unit in Romania. Post 2030, domestic power demand is expected to continue to rise as electrification progresses, not only in transportation, but also in more challenging decarbonization industries such as steel and cement. Let's zoom in more closely and talk about the market demand for our main fuel products in our operating region. Demand for gasoline and diesel will be driven by an increase in the motorization rate, which in Romania is currently only 2/3 of the EU average. All 3 types of fuels, diesel, gasoline and jet, are expected to register higher demand by 2030. Until the end of this decade, gasoline is set to benefit from higher car penetration and a strong push towards hybridization. We expect the gasoline demand to grow by more than 10%. For diesel, most of the growth is expected to occur by 2025, which is due to extensive use in the commercial transportation. This is a sector, where alternative fuels are expected to take much longer to become commercially viable. Moreover, imports of second-hand diesel cars from Western Europe are expected to continue unless strict policies in this regard are pursued in Eastern Europe. By the end of the decade, we foresee diesel demand to increase by 20%. As for jet, the fuel most severely affected during the pandemic, demand is expected to recover to 2019 levels over the next couple of years and then to show further growth reaching a 10% increase by 2030. Post 2030, pressure on fossil fuels will intensify. With this in mind, demand for diesel is expected to fall, taking its cue from the demand in developed countries, whereas the decline for gasoline is expected to be more moderate. On the other hand, jet consumption will see continued growth up to 2040, albeit at a slower pace. This is due to greater difficulties in substituting jet fuel compared to the traditional fuels used in road transportation. We believe that our 2030 strategy has the right balance for OMV Petrom to transition to a lower and zero carbon product mix, while delivering a secure and stable supply to meet Romania's energy demand. Now let's go through each strategic pillar one by one, starting with transition to low and zero carbon. As you can see from our forecast, the demand for our products is set to increase significantly, at least until 2030. At the same time, pressure to decarbonize is growing. We need to support the country's decarbonization, while meeting ever-growing energy demand in the region. Our ambition is to reach carbon neutral operations by 2050. This means decarbonizing our own operations, and here I refer to Scope 1 and 2 emissions, while also helping our customers decarbonize, thereby reducing Scope 3 emissions over time. We plan to achieve this through 3 clear steps. First, decarbonizing our current operations. Second, we built our strategy on the pivotal role of natural gas as a transition fuel in the power mix in Romania. Gas emits almost 60% less CO2 than coal in power generation and the flexibility of gas-fired power plants supports the integration of renewable capacities into the power system. So we aim to expand our gas business, mainly driven by the development of Neptun Deep. Third, by developing our low and zero carbon business, we hope to capitalize on Romania's renewable power and biofuels opportunities. Our investments will also target low carbon mobility infrastructure, which is expected to position us as a leading player in the region. In the second half of the decade, we will also intensify investments in carbon capture and storage as well as in hydrogen production, which we see as fundamental to achieve a net zero ambition in the country. So what will our decarbonization strategy deliver? By 2030, we target a reduction of about 30% in our absolute Scope 1 and 2 emissions versus 2019 and approximately 50% versus 2010. Our commitment to climate change mitigation is reflected by our consistent efforts in the past decade to reduce our emissions across all business segments. And in 2020, we achieved a 26% reduction in carbon intensity versus 2010. With regards to carbon intensity, we will further reduce it in our E&P operations by 70% as we optimize our portfolio and develop Neptun Deep. The carbon intensity of our refining operations will fall by more than 15%, while in our power operations will decrease by more than 20%. And this is not just about carbon emissions. As you know, one of the critical greenhouse gases is methane. We are targeting a reduction in our methane intensity to less than 0.2% by 2025, in line with international targets. Through our commitment to the World Bank initiative, Zero Routine Flaring by 2030, we aim to end routine flaring and venting by associated gas from oil production by 2030. Looking now at our total energy supply, our combined Scope 1, 2 and 3 emissions will decline by approximately 20% in 2030. Our emissions intensity will also decrease by about 20% as our portfolio mix shifts towards lower and zero carbon products. The increase in equity gas will also help our transition to lower carbon energy production. At the same time, it supports Romania's efforts to decarbonize with gas displacing coal in the power generation mix and aiding in the integration of renewable capacities. Over the decade, we are investing in renewable power and biofuels production to provide our customers with a range of lower carbon energy options, and our decarbonization efforts will continue well after 2030. On the path to net zero in 2050, we anticipate that post 2030, carbon capture and storage and hydrogen will also become strategically important areas, not only for OMV Petrom, but also for our customers. Besides decarbonizing our business, we need to help our customers reduce their own carbon footprint as well. Let's now take a look at the low carbon business opportunities that we have included in our investment plan, and I will start with renewable power. Romania has the highest solar potential in the region, which is why the country is well placed to benefit from EU funds for investments in photovoltaic power plants. The European Commission is forecasting that Romania will have approximately 7.4 gigawatts of installed solar capacities by 2030. Under our current plans, we are targeting more than 1 gigawatt of renewable power capacity in Romania by 2030 with added potential in the neighboring countries. Building this position in renewable power will also give us certain portfolio advantages that we can benefit from, in particular the strong integration with Brazi power plant. Another segment we are looking at is biofuels. We see in biofuels an opportunity to reduce emissions in road transportation and aviation. We believe the point at which advanced carbon negative ethanol technology becomes commercially scalable is close. This will allow us to build significant capacity in the production of ethanol from straw, an input where Romania has a competitive advantage in terms of availability and cost thanks to the country's large agriculture sector. We are targeting 50,000 tonnes per year capacity of cellulosic ethanol from straw by 2023 rising to 150,000 tonnes per year by 2030. Ethanol, as the only uncapped biofuel, is expected to grow as a blend in fuels, sustainable aviation fuel and feedstock for green petrochemicals. One particular transportation sector that is hard to decarbonize is aviation. The industry is searching for electric or hybrid technologies, but these are not yet suitable for long flights. We believe that sustainable aviation fuel, also known as SAF, is crucial for reducing emissions in this industry. As such, we are looking into additional opportunities to use waste agricultural products to directly produce higher value aviation fuel and renewable diesel. It is relevant to add that this process will not result in land use that competes with food production. By 2030, we are targeting production of 450,000 tonnes per year of sustainable aviation fuel and renewable diesel. By developing a significant biofuels capacity, we are starting to integrate circular economy into our core business while using advanced technologies. Meeting net 0 targets as a society means not only changing the supply mix in terms of carbon content, but also transforming the demand mix. Currently in Romania, only about 1% of the total car fleet is made up of electric and hybrid vehicles, but this is expected to rise above 20% by 2030. Our plan is to target this opportunity to provide fuel decarbonization solutions to our customers by building the infrastructure needed to drive the future of mobility. The mobility landscape is also expected to change. Beyond diverse energy mix and fuel alternatives, electric vehicle charging will gain in importance. All these will give us the opportunity to explore alternative energy and fuel solutions. So how will we achieve this? First, by 2030, we aim to have more than 500 points of alternative fuels, primarily for electric vehicles. Thus, we will be the first oil and gas player with an electric vehicles charging network developed throughout the region where we operate. This will allow us to capture a huge potential in the market. We will also launch an international e-Mobility card offer positioning us as a preferred B2B partner for electric fleets. Second, we plan to provide lower carbon mobility solutions to fleets which cannot easily electrify such as trucks and heavy traffic vehicles, which are more likely to move towards LNG and hydrogen. With that, we will position for regional LNG mobility leadership and value driven CNG investments by leveraging on our successful integration model. The first CNG refueling station from OMV Petrom network will start operating next year. And third, we will continue to develop our network for all alternative fuels. This includes the longer-term development of hydrogen solutions for mobility applications. And there is more. Our ambitious decarbonization plans go beyond renewables, sustainable fuels and mobility. We believe that Romania has huge potential for carbon capture and storage and for hydrogen production. We have unique opportunities within our portfolio as well as the financial capacity to capitalize on them. Therefore, we have put forward a CapEx frame of more than EUR 1.5 billion, which will be invested after the technical and commercial viability is assessed. The new technologies are expected to help us achieve the target to capture more than 2 million tonnes of CO2 per year by 2030. Regarding CCS, a number of technologies are already in the pre-commercial phase. We plan to take advantage of our high quality geological formations that offer significant long-term carbon storage potential. CCS is expected to play a critical role in reducing emissions not only for us, but for the industry at large. We believe that demand from hard-to-abate industries for CCS is going to increase and we are looking for partnerships with big players in the heavy industry. Those opportunities come with certain challenges and we look forward to working with our stakeholders in this direction. We already started a partnership for a demonstration project, which already shows a promising business opportunity. If all prerequisites are in place, we estimate the first injection could occur in the second half of the decade. In addition, OMV Petrom will test an innovative technology for carbon capture and utilization at the Petrobrazi refinery. In May 2021, OMV Petrom became partner in an ambitious European project to address the problem of CO2 emissions through carbon capture and conversion technologies. These will be tested at Petrobrazi in 2024. Over a 5-month period, we will capture the CO2 from the flue gases released by the cogeneration unit further converting it electrochemically into a marketable product. Another area on the rise is hydrogen. The demand in Romania is set to grow significantly by 2040. We intend to capture this opportunity as well by looking into hydrogen obtained from natural gas blue or turquoise, but also into hydrogen produced using renewable energy. We believe OMV Petrom has the opportunity to become the main integrated hydrogen player in Romania. Our strategy in low and 0 carbon business sets forth with a clear ambition backed by substantial investments over the course of the decade. By 2030, we plan to spend around EUR 3.7 billion in low and 0 carbon projects, which is about 35% of our total CapEx. That isn't just because contributing to a world with net 0 emissions is the right thing to do. It is also because we believe that we can generate attractive returns from these investments with full cycle IRRs exceeding 9%. Depending upon the pace and results of the pilot projects, on the development of the necessary regulatory framework and on the availability of EU funds; we will have flexibility amongst our low and 0 carbon projects. Let's now take a look at the second pillar of our strategy, growing regional gas. At the heart of this is our Neptun Deep asset in the Black Sea, which is a game-changing project for OMV Petrom and for Romania. Encouraging steps have been made for the finalization of negotiations between Romgaz and ExxonMobil. And as already announced, after the completion of the Romgaz ExxonMobil deal, OMV Petrom will be the operator of the block. However, Offshore Law amendment by the year-end is critical for the Neptun Deep gas to be developed and extracted. Unforeseen government changes have led to delays in the legislative process. The Black Sea gas is strategic for Romania and we have seen commitment from the Romanian authorities who have stated the law is to be amended by year-end. Any delays in event in amending the Offshore Law put pressure on the project, threatens Romania's energy security and leads to higher gas imports. Legislative changes in place are critical for the project taking into account that 5 years are needed from prerequisites in place to first gas. If there are no changes in law by year-end, this will delay FID into 2023. One thing will not change. The Black Sea gas remains a unique opportunity for Romania. We expect to invest up to EUR 2 billion in Neptun Deep and to add a total estimated recoverable resource of about 50 billion cubic meters net to OMV Petrom. This project will contribute to our reserve replacement ratio, which is expected to exceed 100% when Neptun gas comes on stream. It is estimated to have a plateau production of about 70,000 barrels of oil equivalent per day, again net to OMV Petrom, for an estimated period of about 10 years and then enter natural decline. This gas volume represents a significant shift in our portfolio balance. It will also provide an important stepping stone to greater energy security and the development of a lower carbon economy in Southeast Europe. Without Neptune Deep, we estimate that the import gas share in total Romanian consumption would rise to 50% by 2030. In addition, it will also reduce the carbon intensity of our E&P portfolio by more than 70%. Let's watch together a short video that provides details on how this project will be developed. The video is developed with our current partner in the joint venture, ExxonMobil. [Presentation]

As mentioned earlier, Neptun Deep is a game changer not only for OMV Petrom, but also for Romania. And the Black Sea is also about other projects besides Neptun Deep. OMV Petrom has more than 40 years of experience as an operator in this basin. Our knowledge of the Black Sea can help unlock potential for further growth beyond Romania and position OMV Petrom as the partner of choice in the Black Sea region. We have already access to the neighboring Bulgarian offshore block Han-Asparuh, which is located south of the Neptun Deep block. Han-Asparuh is a non-operated joint venture between TotalEnergies as operator and OMV Petrom. Following geological and geophysical studies to identify additional drilling targets, 1 well is planned in 2022 or 2023 with a further 2 or 3 more to follow. On the opposite shore of the Black Sea, OMV Petrom holds the title for the Georgian offshore Block II. The production sharing contract was signed in March 2021 and we are preparing for a large offshore 3D seismic campaign in 2022, which will allow for a detailed evaluation of this block's potential. A decision regarding exploration drilling is expected at the beginning of 2024. In line with industry practice, we are also taking into consideration farm-downs in order to share the risks and returns of all these projects. We will also continue our exploration activity in the region with average expenditures of around EUR 30 million per year by 2030. The third pillar of our strategy focuses on value over volume and driving operational excellence, capitalizing on our integrated business model across all business segments. Our core business is expected to continue to be highly cash generative allowing us to fund investments in regional gas growth, low and 0 carbon projects as well as the dividend distribution until Neptun Deep comes on stream. Let me provide some details on how this pillar reflects in each of our 3 divisions. First, in Exploration and Production where we are fighting a natural decline of more than 10% per year, our objectives are to maximize the economic recovery of our mature fields and to lower unit production costs. We will significantly reduce complexity in our operations ensuring resilience and profitability in the long run by further divesting non-strategic fields and by outsourcing non-core activities. To unlock additional resources, we will concentrate our investments on the most profitable 100 to 120 fields, mature the contingent resources via infill drilling and near field opportunities and implement enhanced and injection oil recovery projects. We are maintaining our expectation for an operating cash flow breakeven oil price of around $30 per barrel by 2030, which proves the resilience of our fields. Let me give you some numbers to quantify what I have just told you. Our hydrocarbon production is a story of 2 halves. In the first half of the decade, we will continue to optimize our production and high grade our portfolio. By 2025, production will decrease by 5% on a compounded annual rate mainly due to natural decline, the divestment of our Kazakhstan assets and other portfolio optimizations. Net of divestments, the decrease is lower at 3%. In the second half of the decade, production is expected to increase due to the start-up of Neptun Deep. By 2030, we plan to increase our hydrocarbon production by more than 50% versus 2025 with gas accounting for about 70%. Given the lower production and higher costs, our unit production cost will stay close to the current level of almost $13 per barrel by 2025 and will significantly decrease when Neptun Deep comes on stream. Our operating cash flow in dollar per barrel of oil equivalent will increase over the period at a compounded annual growth rate of above 5% between 2020 and 2030. Moving now to Refining and Marketing. Since 2005, we have invested more than EUR 1.8 billion in our Petrobrazi refinery to ensure best-in-class asset operations and reliability, capturing value from high levels of integrated operations and increasing fuel demand over the period. Until 2030, we expect an average refinery utilization rate greater than 95%. In 2023 and 2028, we plan major turnaround programs. Thus the utilization rates will be between 85% and 90% in those years. We will further maximize value through integration and efficiency, shifting the production towards higher value products and preparing for a sustainable refining business. We will upgrade the bottom of the barrel towards non-fuel products like bitumen, carbon black or calcined coke and explore value-adding opportunities, including an increase in aromatics capacity. In retail, our long-term ambition is to maintain our current leading position in Romania while capitalizing on our position in other markets where we operate. We will continue to leverage our dual brand strategy, Petrom and OMV, as our main competitive advantage. For the Petrom brand, we will pursue strategic partnerships in the non-fuel sector such as the one with Auchan. In order to increase customer loyalty and attract especially younger families, dedicated campaigns will help secure Petrom's top position as a brand of national importance offering the best value for money. In the premium segment, the OMV brand will maintain its position as top quality leader with high performance fuels. This is perfectly complemented by the VIVA shop experience, which stands for higher value products with good quality ingredients. These will reflect in our performance. Our non-fuel business margins are expected to double by 2030. Together with the rise of throughput per filling station, this will drive the increase in profitability per filling station by 20% in 2030 compared to 2020. While imagining the future, we believe that retail in general and service stations in particular will play an important role. We see opportunities to change the way we do business, to be more sustainable and at the same time build more meaningful, more purposeful relationships with partners and customers alike. We expect the future mobility landscape to be diverse and this will be reflected in the customer demand and the availability of future energy choices. We will continue to explore all alternative energy and fuel solutions. One of our strongest competitive advantages in retail is the extensive customer access we have. This is expected to increase to above 2 million clients per day in our stations and will allow us to have a meaningful impact on decarbonizing mobility. As a leading provider of products and services for mobility in the region, we aim to drive value through partnerships and increase customer loyalty by anticipating the needs of new generations. Our receptiveness to customers' needs will also be reflected in a broader number of services offered such as last mile delivery, pick-up point and waste energy services. Digitalization plays a key role in our lives and is expected to have a greater impact on the customers' future experience and focus. We aim for a single-digit gate to our brands by offering timely and tailor-made future experiences. Digitally smart mobility entails, among others, fast track payment at the pump, holistic approach on a digitalization of the sourcing, manufacturing and stock management operations in freshly prepared food on the go. In conclusion, we expect future mobility to be smarter, digitally enabled with service stations providing more personalized experiences and offering timely solutions to our customers. In Gas and Power, we aspire to become the supplier of choice for customers in their energy transition. To do this, we will grow beyond our equity gas by further extending origination and trading, enhancing gas and power portfolio management and developing operations in neighboring countries. These will translate into total gas sales increasing to approximately 70 terawatt hours by 2030. In the power business, our investments in renewable power will lead to green power sales making up more than 20% of our total power sales by the end of the decade, thus contributing to our ambition to reduce Scope 3 supporting our customers' transition to cleaner energy. These shifts in the power mix and investments in low and zero carbon projects will reduce our GHG emissions intensity by about 20% in 2030. It will also contribute to reducing the region's emissions intensity without compromising energy security. With that, I will now give the floor to Alina, our CFO, who will guide you through the financial frame of our strategy.

Thank you, Christina, and a warm welcome to all of you from me as well. Let me present to you the financial frame for our Strategy 2030, which is based on 3 key elements: rigorous capital discipline, strong financial performance and attractive returns to shareholders. We are starting our transformation for a lower carbon future from a privileged position. Our healthy balance sheet and strong asset base support our strategic ambitions of combining value-enhancing growth with competitive shareholder returns. The first element of our financial frame, rigorous capital discipline, refers to capital allocation within strategy pillars, ensuring appropriate returns and payback periods, while considering strategic and operational risks and opportunities. The second element of our financial frame, strong financial performance, ensures that we deliver competitive operational profits in each of our strategic pillars with an overall return on capital employed above 12%. The third element is referring to attractive returns to shareholders. Our ambition is to offer a highly competitive growth in base dividend per share with an overall allocation of 40% of the operating cash flow to dividends for the next 9 years. Our capital allocation at company level between capital expenditures and dividends ensures that we do not exceed a threshold of 20% for the gearing ratio throughout the period. Let's go into more details into the first element of our financial frame. We envisage an overall CapEx for the strategy period of around EUR 11 billion based on averages of EUR 1.1 billion CapEx per year for the next 4 years and around EUR 1.3 billion per year for the following 5 years. As Christina mentioned already, the investments will shift from our traditional business to the other 2 strategic pillars. First, to regional gas growth, where we will invest in our flagship project, Neptun Deep, but also in the other 2 perimeters in the Black Sea, in Bulgaria and Georgia. And second, to the strategic projects supporting our energy transition, for which the main part of the investments will come in the second half of the decade. Capital discipline at project level is based on strong governance, interim monitoring of projects and post-investment reviews. We focus on selecting the most competitive and resilient projects. We ensure healthy internal rates of returns, reflecting risk and return profiles. Our internal rates of return for traditional and regional gas growth projects are above 12%, while for energy transition, we aim to achieve above 9% unleveraged IRRs. Our transformation for a lower carbon future is reflected in all our 3 business segments. The Exploration and Production segment will focus in the first part of the decade on regional gas. While in the second half, we will see a transition from the traditional drilling and workover projects to investments in carbon capture and storage opportunities in Romania. About 1/3 of our CapEx will be in Refining and Marketing, not only to optimize the current business, but also to transform our refinery and prepare it for advanced biofuels and hydrogen projects. In Gas and Power, as already mentioned, we are planning investments in renewable power capacities, aiming to achieve in partnership more than 1 gigawatt installed capacity by 2030. Looking now at the financial performance. Our Clean CCS EBIT will see a significant increase by the end of the decade, mostly thanks to the regional gas and low and zero carbon projects. Our commodity assumptions see a Brent oil price between $65 and $70 per barrel and the refining margin between $5 and $6 per barrel under the base case scenario for 2022 to 2030. Our traditional business will continue its strong performance with Clean CCS EBIT higher than in 2020, generating cash flows to support investments in lower carbon future. In the second part of the decade, Neptun Deep will also start producing, contributing to the Clean CCS EBIT with approximately 1/3 in 2030. By the end of the decade, our strategic pillars transition to low and zero carbon business will provide about 15% of the Clean CCS EBIT, mainly from biofuels and renewable projects. By 2025, Clean CCS EBIT will average around EUR 0.7 billion per year. Afterwards, the group Clean CCS EBIT is expected to gradually increase to more than EUR 1.5 billion in 2030. The R&M Clean CCS EBIT is expected to gradually increase by 2030, with retail as main contributor with about 70% share on average, reflecting higher retail sales volumes, broader mobility services and higher non-fuel business. The Clean CCS ROACE will progressively increase to more than 12% in 2030. Moving to the third element of our financial frame, we have the ambition to offer highly competitive dividend growth, while maintaining our strong financial position with gearing below 20%. Therefore, today, we are reinforcing our existing dividend policy, but with a stronger commitment. We target to increase our base dividend per share by 5% to 10% per annum on average over the Strategy 2030 cycle. Furthermore, in a favorable market environment, at management discretion, special dividends may also be distributed, provided that our CapEx is fully funded. Based on our forecast today, we are confident that on average for the strategy period, we can allocate around 40% of our operating cash flow to dividends, significantly higher than the 20% average ratio of the past 5 years. Consequently, cumulative dividend distribution by 2030 almost matches our current market capitalization, which indicates the attractiveness of our shares. In terms of dividend yield, over the past 5 years, 2016 to 2020, OMV Petrom share offered an average dividend yield of slightly above 7% and a total shareholder return of about 13%, one of the highest among industry peers. Going forward, we plan to continue to offer competitive dividend by 2030. We also analyzed the resilience of our strategy under a downside price scenario. Climate change is a challenge for the whole society, and reaching net zero emissions by 2050 will require the joint efforts of governments, industries and consumers. We all have seen numerous scenarios regarding energy transition, especially in the preparation for the COP26 Summit. Scenarios vary widely, depending on evolving commitments from various governments and development of new technologies in various industries. Given the uncertainties generated by the long-term horizon and increasing challenges both by climate change on our industry, we have tested our strategy for a downside price scenario, with a Brent price around $50 per barrel, a refining margin decreasing to $3 to $4 per barrel and a lower gas price and CO2 price increasing to slightly above EUR 100 per tonne in 2030. This scenario represents our view on the downside potential for the main market risks we are exposed to. The results of the stress test show that our strategy is resilient, our still strong financial position allowing us to keep our CapEx target broadly unchanged and to maintain our commitment to distribute growing dividends, while keeping the gearing ratio below 20%. In conclusion, we believe that our Strategy 2030 and financial frame will translate into a compelling investment proposition. As already mentioned, I would like to highlight that during this transformation, we will allocate 20% of our investments to regional gas growth and 35% to low and zero carbon business, which will all lead to more than double the Clean CCS EBIT in 2030. Our disciplined capital allocation, together with strong financial performance, is what will generate the cash flows required to deliver growing dividends to our shareholders. Consequently, we strongly believe that our financial proposition to investors provides both sustainable long-term value and attractive returns to our shareholders. And now let me hand back to Christina for the closing remarks. Thank you.

Thank you, Alina. Ladies and gentlemen, allow me to summarize our 2030 strategy. We are committed to play a leading role in the energy transition in Romania and Southeast Europe. This is underpinned by being the largest private investor in the Romanian energy sector with a total of EUR 11 billion of investments. We've set the goal to achieve net zero operations by 2050 by significantly reducing the carbon intensity of our operations and by implementing new and emerging technologies, such as carbon capture and storage as well as hydrogen production. By 2030, we will reduce the carbon emissions of our operations by about 30%, also supported by the CapEx shift to low and zero carbon business. Neptun Deep is fundamental for OMV Petrom and Romania's decarbonization. By 2030, gas will make up 70% of our hydrocarbon production, contributing to Romania's security of supply. Interests in Bulgaria and Georgia also add to consolidating our position in the Black Sea basin. We will deliver highly attractive shareholder returns based on a strategy that put to the test has shown resilience. Ladies and gentlemen, we are starting today our transformation journey for a lower carbon future. We all know what OMV Petrom looks like at the starting point, a company with a robust balance sheet, sustained strong performance based on an integrated business model and a reliable partner for Romania. The strategy we present to you today shows how we will further transform our company, offering decarbonization solutions to our customers, supporting the Romanian society on its path to a carbon-neutral future and creating sustainable long-term value for all our stakeholders. By the end of this transformation journey, we will be a new OMV Petrom, a strong, modern and resilient leader in the lower carbon energy landscape. Thank you very much for your time. I will now hand it back to Simona for the Q&A session.

Thank you, Christina. [Operator Instructions] The first question comes from Raphael DuBois from Societe Generale.

I have 2 questions. One is about renewable power. Could you please tell us if you intend to go alone or find a partner as you consider making an acquisition instead of building from scratch your way into this new business? And still on the renewable power, is there a mix of merchant price versus PPA that you target? And finally still on renewable power, can you share with us what sort of prices are -- you can currently see? And if there is any cap that will be implemented in renewable capacity if you were operating now?

Raphael, thank you very much for your questions and thank you for joining us this afternoon. Franck, the floor is yours on renewables.

Yes. Thank you, Raphael, for your question. I mean, let's take the first one about partner or not. Indeed, what we are looking for is, I'd say, mixed solution with our development of renewable power. So we will look for partnership, but we will also develop part of it ourselves. So I think it will depend on the different projects we will see on the market. We see that there's financial partner wants to collaborate with us, we see some people who are looking at some developers who are looking for -- to sell project as well, ready to build. So there will be a mix and we see also a land owner who wants to work with us on the development of the projects. So you will see between our own lands, work with landowners, or to buy ready to build. There will be a mix of projects on that. In term of the power, we -- as we mentioned during the strategy when Christina was explaining is we are looking to sell green power to our customers. So what we are looking is to establish PPA or short-term contract with our customers in term of green electricity. So to come back to you, it will be certainly a mix of merchant and PPA. And we see that the market is starting to develop on PPA, more -- not PPA of 10 years, but PPA below 5 years. So we will look at this type of market for the electricity. In term of cap, I'm not so sure what you have in mind, but what we have, we say is we have a minimum target when we -- in term of linked to our CapEx and linked to profitability we are looking for. I'm not so sure what you were asking on that. But if you can -- maybe more precise.

Sorry, I was not very clear. If you could just tell us what are current power prices in Romania? And also, we have heard of some countries imposing a cap on prices that can be obtained. Will it be the case currently in Romania?

So in term of power price, at the moment, I think everywhere in Europe, you see quite an increase of energy prices, gas and power on CO2. So in Romania, we have the same trend. So we have a power price, which is quite a premium versus other countries, which also give us confidence in term of the need of new capacity, especially in renewable power. We are focusing also on the solar energy because peak power is quite expensive today in Romania. So that's why also we want to capture this -- the demand and the needs we have in the peak. We are looking at prices. I mean, if we look at, I don't know, a day ahead, we are looking at more than EUR 200 per megawatt hour at the moment. Looking forward, of course, the prices are lower. But we see a mix of -- between the spot and the future market, we see a spread between the spot and the future markets as such. Now about the cap, yes -- I mean, different countries due to this winter situation have introduced some cap. Romania is including. They put, not really a cap, but a tax on power above a certain amount, which is nearly EUR 100 per megawatt hour. So it's quite -- the tax is triggered quite at a high level. And that is an exceptional measure due to the situation on the market for the house -- to protect the household and vulnerable customers.

And doesn't include fossil fields.

And -- no, this tax does not apply to fossil fuels. So only for, I would say, renewable, but also -- I mean, renewables, yes, including hydro. Yes.

Simona, back to you.

Next question comes from Oleg Galbur from Raiffeisen.

Thank you for the presentation and for the insightful information that you shared with us. I have 3 questions. And the first question refers to the Refining and Marketing segment. Could you please provide more details on the segment's earnings split or at least disclose the profitability per filling stations, which is shown on Slide #31, in order to help us understand what is driving the Refining and Marketing EBIT growth over the next 5 years? And I guess the Retail segment by itself is becoming more and more important for the overall n generation for the whole group, according to my expectation, given it should become larger contributor than the E&P segment by 2025. And therefore, I guess, helping us understand the developments in this subsegment in the retail business is gained. My next question refers to the low carbon CapEx. Based on the current legal framework, how much or at least which of your planned low carbon projects could be eligible for the EU co-financing under the -- by the next-generation program or this multi-annual financial framework? And last but not least on dividends. Firstly, you have mentioned that paying special dividends is also possible provided that CapEx plans are funded. Could you please help us understand what exactly does it mean, especially in the context of the current strong cash position and the expected n generation, while near-term CapEx would be below the average for the period? And secondly, how should we think of the 5% to 10% annual increase of dividend per share? Would, for example, 10% be the maximum annual increase or depending on earning generation in that specific year, there might be years with higher than 10% or lower than 5% increases in EPS?

Oleg, thank you very much for your questions. Again, thank you for joining us. Radu, do you want to jump in on the refining and marketing question, then Alina I think dividends for sure and how we are assuming with regards to e-funds within our CapEx rate.

Thank you very much for the question, Oleg. Indeed, retail is a significant part of our business, but it's a significant part of our business as well today. We believe that retail is going to play an important role in the next -- in this decade and as well in the next period in the next -- as well in the [ K20 ] to follow, considering the fact that we have a very, very strong presence into the market and that we have a significant and solid base. So therefore, we are going to develop in that segment and offering a diverse mobility solution, adding as also shown by Christina on the alternative mobility solutions and as well developing the convenience and we need to be cognizant that digital [indiscernible] is going to be an important role in the future. As well refinery will stay significant -- as well a very important player in the Downstream segment because we -- as we've shown there, we believe that we're going to have a strong margins. And as well, we are going to further capitalize on the integration of our assets. So basically, we are going to have a high utilization rate of the refinery and all the products are going to end in our sales channel. So ending in our sale channels, that means that we are going to capitalize on all our assets, both refinery and retail, for example. The -- and we have a specific valuable position in the moment because, as I was mentioning, we're having a strong retail, but also commercial position, we can, in the future, reduce our third-party supply and basically consolidate more our equity sales in our network. So I would say as of -- if you look to -- at the landscape of today, this is going to stay as a proportionate contribution to the downstream as well in the future, considering the value of the retail and refining as well in the period to come.

Okay. I will continue with firstly the question related to the CapEx. We believe that most, if not all, of our low and zero carbon projects might qualify for EU funds. So we definitely apply for it. In our economics and modeling, we assumed on the conservative side rather EU funding. However, we will do our best and we will apply for EU funds and subsidies. What is important, capital discipline and a strong business case, we've put a threshold of 9% internal rate of returns for all these low and zero carbon projects in order to make sure that we deliver expected returns. So this would be on the CapEx side. The next question was on the dividends. And I could refer to both dividend -- base dividends, but also special. So all depends on both our financial performance, but also market and business environment. So in a good market and business environment, we should expect that to see dividend growth towards end of the interval, towards 10%. In a more negative situation, we would expect towards the lower side. When it comes to the special dividend, there are some uncertainties which exist currently in our business plan. Of course, we need to look how this 2021 year will end. But more important than that, it's uncertainty about Neptun Deep timing and especially related to Offshore law, which is the main trigger that will determine when we will have the FID for Neptun. So once all these uncertainties will be clarified, we will be in a better position to provide estimates and details about special dividends.

Thank you. Simona, back to you.

Next question comes from Dana Mandru from Swiss Capital.

I'd like to discuss a little bit more about your game-changing project, the Neptun Deep project. My first question is, what is you -- the net present value of Neptun Deep project in a base case scenario? And related to this question, if you can disclose to us what are your long-term gas price base case scenario for this NPV computation and the OpEx per BOE, of course, assumptions? The next question would be regarding -- with regard the main [indiscernible] amendment to Offshore law to start Neptun Deep project. And I had other answers -- other questions already answered. So this would be all for now and -- no, no, sorry. I remember another one. The expected realized gas price in 2021, please be remember -- please remember the fact that Romgaz is disclosing the price. So I don't see any threats to you in disclosing this price. And if you do not disclose this price, please at least let us know the expected realized gas price increase in 2022, so the increase for the next year.

Thank you very much, Dana. I will take on the Offshore law amendments and then Alina will talk about Neptun economics, and Franck will take on realized gas prices on that. So Dana, thank you very much for your questions. As we talked about and as you rightly said, Neptun Deep, we see as a game-changer for OMV Petrom and also for Romania. Without it, we actually see that the country will need to import about 50% of its gas by 2030. So we do see it as fundamental for energy security, economic prosperity, but also very key actually in the climate change agenda and energy transition to displace some of the coal power generation that's in the country. Key for this, obviously, to move this project forward will be amendments to the Offshore law. The 3 key areas that we are looking at, one is the stability clause ultimately to make sure that when the gas comes on stream, that you don't suddenly find that your tax system changes on you, and this is not uncommon and generally required on all major capital investments in the oil and gas arena. The second component is the fiscal take. The fiscal take is very high from a competitive perspective versus other parts of the EU for the offshore, 3 to 5x higher than that, which is a disproportionate distribution of the economic rent of this project. And the final one is the right to freely market gas, some of which has already been addressed through the gas release program, but needs amendments in the Offshore law for that. So these are the fundamental aspects. Once we're able to see that and the prerequisites are in place, we estimate 5 years till first gas. So I think it's really important to be able to move this forward. We do see encouraging signs, obviously, we can see that the Romgaz and Exxon transaction appears to be getting close. On the point of time that that completes, we will take over as operatorship and will be ready to take on that role. And we do see this as a strong signal from the Romanian authorities who want to change the Offshore law, plus their commitment, obviously, to Romgaz as the main shareholder for that. With that, I'll hand over to Alina to cover the economics of Neptun Deep.

Thank you, Christina. Thank you, Dana, for the question. So we provided today some important information that will enable you to calculate the net present value. And I will summarize those as follows: CapEx for Neptun is up to EUR 2 billion. Then we disclosed the internal rate of return, that should be above 12%. We disclosed the production at plateau of around 70,000 BOE per day for a period of approximately 10 years of plateau after that being followed by the natural decline. And we also disclosed an overall resource number, estimated recoverable resources for Neptun 50 million BCM. So I think the only information missing to calculate the net present value is the gas price. You can estimate with various gas prices, but for our view, I will hand over to Franck now.

Yes, thank you, which -- of course, it's not easy to forecast as you can imagine gas price on this horizon. But just -- we'll not give you the details, but I could tell you that we are quite, I would say, conservative and we are looking for a price scenario between EUR 20 and EUR 25 -- EUR 22 and EUR 25 per megawatt hour. So I think it's quite conservative for this period. And we have also a downside scenario around EUR 17, EUR 18 per megawatt hour. In term of your other question about 2021, I think, again, you'll be a bit frustrated. We are not disclosing our realized gas price, but we are slightly above on gas, if you want to [indiscernible] In term of next year, I think we see an increase, that's for sure, and quite significant because, as you said, in 2021, most of the sales were done at the beginning of the year, even at the end of last year. So we had the prices, we were not necessarily capturing the increase of gas price, which was incredible, especially in Q4 and beginning of Q4 in October. But what we see is what we have signed on already for next year, it's a much higher price than this year. Just to give you a number today on the gas mix program, we sold at EUR 70 per megawatt hour 2022, calendar 2022, this information, which is available on the gas mix program. So it won't be realized as far as for next year, I don't think so, but it gives you -- certainly, you will see an increase for next year.

And I think if I could just add one thing. Although we will see, obviously, increase in our realization price, there is a supplemental tax that kicks in, I think, above EUR 80 per megawatt hour, 85% tax kicks in as supplemental tax. So we do not see the full benefit of the higher prices coming through into the bottom line in the exploration and production business because of the supplemental tax. I think it is an important thing as you're working on your modeling.

I think one answer we are missing actually on the OpEx. I'll maybe give you also some indication on the OpEx. Of course, Neptun Deep will be -- have a major impact on our OpEx. We disclosed that we -- our production cost about $13 per BOE. And with Neptun Deep included, we'll try to achieve actually $7. So this gives you [indiscernible] base calculation.

Thank you, Chris. Apologies for that. Please, Simona, back to you.

The next question comes from Jonathan Lamb from Wood.

Sorry, can you hear me?

Yes.

Yes, we can now.

I don't know, you didn't mention what your gas price assumption is long-term. You have oil price assumptions, CO2 assumptions, but not gas price assumptions. So...

Franck, you just want to mention that again?

Yes, yes. We just mentioned it, sorry, but it was between EUR 22 and EUR 25 per megawatt hour.

Did you catch that, Jonathan, okay?

Actually, no, I didn't know, I just have a speaker in this function.

Okay. He said EUR 22 to EUR 25, yes?

Yes.

EUR 22 to EUR 25 per megawatt hour is our long-term price assumption for gas.

[indiscernible]

Right. Okay. Another question, under the gas page, you said you see 20x customer increase. Did I understand that right? Does that mean a big change in your gas business model?

Yes, Jonathan. So it's not only gas, it's, I would say, gas on power. So what we are looking is we are developing our portfolio, especially on the SME segment. So -- and we have developed a new platform, digital platform this year. We will be -- we're already live on gas, we'll be live on power next year. And our target is to increase our market share, especially number of customers in SME segment as part and to complete our B2B footprint we have today.

I think I could hear -- Simona [indiscernible] that was the last question from Jonathan?

Yes. I believe. Okay. Jonathan, if you have further questions, please raise your hand again and we will take it from there. Next question comes from Irina Railean from Banca Transilvania.

Thank you for the presentation. Do you hear me?

Yes, we do, Irina.

Thanks for the detailed presentation and wish you all the best in this new journey. Part of my questions have already been answered, so I have just a follow-up question regarding the Neptun Deep and especially what is the CapEx amount that has been spent up to this point for this project, if you just could remind us about the figure?

Alina?

Yes, yes. So what we have announced, we have spent together with Exxon until now more than $1.5 billion. This is the CapEx number.

Irina, does that help answer your question, I think?

Sorry, and could we assume basically the 50%...

Yes, yes, absolutely. Yes, 50% our share is.

The next question comes from Alexander Burgansky from RenCap.

I have a few questions. If I can start with the Petrobrazi refinery place, I want to -- can you please explain a little bit your strategy, how you plan to decarbonize your refinery business? Also, how is adaptable your refinery to the renewables? So assuming that you want to increase the share of renewable production down the road, what percent of your existing assets at the refinery could be adapted to that renewables? Or do you need to build new facilities and you cannot utilize the existing assets? Also, I was wondering, if you could talk a little bit about petrochemicals. That was one of the options that was available to you to maybe boost the investments and build some more petrochemical businesses, obviously, you've decided not to do that. So why did you not make a decision to go into petrochemicals? And also finally on that part, if you could also talk a little bit about your existing hydrogen experience? I assume that you are producing hydrogen through your refinery operations. So how much hydrogen are you producing now? What type of hydrogen? And how do you plan to expand your hydrogen production? Then my other question is on the financials. So can you please give a guidance for CapEx for 2022? And also your commitment not to exceed the 20% gearing; I was wondering on the what oil price assumptions do you expect that you will need to resort to some kind of debt financing at all? I mean, obviously, currently, you have a large net cash position. So is that giving -- when does that come into play at overall price assumption? And then finally, just a clarification on the Neptun Deep CapEx so the EUR 2 billion that you're talking about and the gearing and the investments that you spend today. Sorry, not gearing, the internal rates of returns that you're talking about for Neptun Deep. Does that incorporate the investments that have been spent today?

Alex, thank you very much, Alexander. Radu, do you want to start with the Petrobrazi and then Alina into the financials, yes, and maybe just a point of clarification on the Neptun CapEx spend.

Sure. On Petrobrazi refinery, so we believe, as I was earlier mentioning, we believe that the refinery has good grounds to have to run on very high rates. So we assume for the end of this decade being -- I mean, for this decade, actually running on average 95%, except the 3 years when we have turnarounds and still as well, end of 2040, we are seeing rates of 85%. On that, how do we integrate the renewables? Absolutely a fair question. As mentioned here, we talk about 2 directions. One direction relates to the fact that we see the biofuel second-generation ethanol, which could be in itself a standalone solution or could be an integrated solution in the finery and we are [ moving ] to both options. And as well when you talk [indiscernible] unit, it could be a standalone solution, but as a more integrated solution. But we see it more -- it has been an integrated solution in the refinery. So basically, building on our asset base and integrating those new solutions, definitely generate synergies and benefits for the refinery. And for the carbonization, we are definitely -- we need to optimize. Still, we work on our existing businesses, optimizing it and for the medium term, we are looking on how renewable could help us on further optimizing the Scope 1 and Scope 2, so decarbonizing our facility. Another aspect that our industry has to look into it CCS and on a CCS, by the way, we have a project that we are looking into it. It's a demonstration plant to build on together with some other partners on a program funded by EU funds, which was kicked off this year, and we are going to test it in 2024. But it's something that we need to learn and we need to apply it for the future. When we talk about petchem, why not? Well, petchem was not completely excluded. It was not completely excluded because, for example, on our aromatics unit, which gets the end of lifetime we decided to replace -- not to replace it but to increase the capacity of our aromatics unit and have a significant increased production on one hand. On the other hand, of course, we're having a much more efficient unit. But that's the thing that we are going to do on a short-term and to look on to higher petchem development, you need a certain scale and refinery, where we are managing 4.5 million tonnes, it's not having the scale that would encourage going on units that could significantly grow. But we believe that the biofuels, which are right now the answer for the sustainable refinery production could be on a long-term distribution for the bio-petrochemicals. But it's a thing -- that's the value of those biofuels because you see the value of it today, but you see the value of it as well tomorrow and as a potential feedstock for Bio-pet-chem. On hydrogen, our experience, we have certain percent of reduction, but most of it we are buying off the fence. Anyways, we are looking into developing hydrogen green unit team in the refinery, the purpose to integrate it in -- for the benefit of our production and the de-carbonization of the -- our production and as well learning in this field. I hope I was answering to all the questions?

Okay. Alexander, I will continue with the financials. So the first question was about CapEx. We provided the guidance for CapEx for the next 4 years. So 2022 to 2025 of an average of EUR 1.1 billion. When we look at 2022, we do not provide now the exact details, but you should consider lower than this average. But definitely would be higher than what we have spent in 2021. This is the reason being that we are still not there with the final investment decision on Neptun. The next question was about gearing so gearing limit of 30%. So indeed, right now, we are on a net cash position. A net cash position, which is due to the several years of delay with Neptun year-after-year. Now once we will start spending the CapEx for Neptun. In addition, we have announced today significantly higher CapEx than what we spent in the last 5 years. So in a couple of years, I mean, you will see our net cash position definitely decreasing year-by-year and also going into a net debt position. Now depending on the oil price and the market environment in general, what we have done, we have tested our strategy for a downside price scenario. This downside price scenario for us was that with the oil price at $50 per barrel and refining margin $3 to $4 per barrel. In such a downside price scenario, we will reach this limit of 20% but will be in a position not to exceed it and in the same time, to be able to largely spend our CapEx plan of EUR 11 billion and also to keep our commitment of growing dividends by 2030. And the last question I noted was related to the Neptun internal rate of return of 12%. Yes, I do confirm that this rate of return considers the CapEx already spent until now. Thank you.

Thank you. Simona, back to you.

[Operator Instructions] Next question comes from Tamas Pletser from Erste.

Yes, first of all, just to remark, I was pretty much astonished -- how profitable your project in Neptun can be. So thanks very much for all the details. I think it is a positive driver. And most of the colleagues asked the questions I had, but I had only 2. First of all, can you tell us a little bit about your CCS opportunities? I know that Romania has a lot of depleted oil and gas mines. So I suppose you should have a lot of opportunities to store CO2. Do you have any figures? Do you have any estimate how much potential do you have? That would be my first question. And my second question, just a follow-up on this Neptun project. You mentioned the $7 per barrel OpEx. Is this decline only coming from Neptun or do you expect some changes for your traditional portfolio for production costs?

Thank you Tamas. Chris, I think his questions are all for you.

Yes. Concerning the CCS potential, I think it's understood that in the richer zero target on the climate change actually, CCS has to be integrated otherwise this target is not achievable. And we see that the European legislation actually went already into the Romanian legislation by law, actually in 2011. Merchants Ordinate 64 addresses that taking over the inflation actually from the EU. What we are doing at the moment, we're looking in 3 aspects on the CCS potential. First is, of course, as you mentioned already, the gas reservoirs -- existing gas reservoirs. It's one. Then second one is we look on the selling [indiscernible]. But this means actually, we need to explore for them because in the past, actually, we never explored for selling [indiscernible]. It's something in the oil and gas business, you try to avoid actually. So and the third pillar is Neptun Deep or offshore. Here, we also see some potential in the existing gas fleets, but also in Neptun Deep, if emptied could be a possible CCS storage. The quantities, we mentioned them already. We want to store about 2 million tonnes per year, and we're looking actually for storage for these volumes in the past -- in the future. The second one was on the OpEx number. I think here's a misunderstanding, the $13, what I mentioned, is all inclusive. It's the number -- this is to-date. And together, in future, when we produce Neptun Deep we will come together to $7 per BOE. This means Neptun Deep, of course, less than the $7.

Thank you, Chris. Tamas, I hope that answers your questions. If so, I hand back to Simona.

We have now several follow-up questions. The first one comes from Societe Generale from Raphael DuBois.

I have a few questions about transport fuels and refining. I guess the first one is about slide 13, where you show diesel demand, gasoline demand dropping quite fast after 2030. Could you please remind us of the EV penetration rate that you expect in Romania by then? And how much trust you put in those forecasts? It seems a bit ambitious, I will say, to expect that there will be so many EVs in Romania in between 2030 and 2040, but I would like to be convinced. Then on the refinery and it's linked, can you share with us how you expect the competitive environment to evolve in Romania refining wise? Since you invest so much in Petrobrazi, you clearly expect some of your competitors probably to close down and accommodate for the lower diesel and gasoline demand by then. Can you maybe share with us how many refineries you would expect to be closed down in Romania by then? And finally, and it's still very much linked, biofuels. Most of the capacity that you are going to bring to the market is in 2030, it's in 9 years from now. So how come it takes so long to bring capacity to the market? And you talk about agricultural product waste, when most of your peers talk of used cooking oil or animal fat. So does it mean that you will not try to diversify your feedstock into those used cooking oil and animal fat? You will only take on some agricultural product waste?

Radu?

So transportation fuels and evolution to 2030 and 2040 on diesel and gasoline. For the reasons explained by Christina, we believe that we have significant opportunities for growth in the Transportation segment, for good reasons, as mentioned, I'm not going to -- just a couple of them may be the fact that motorization index is lower, the fact that we see significant economic growth for the following period and as well as the transportation for the heavy transportation, there is no obvious alternative. So if you look on all these numbers, the growth for this decade is, I think it's a very solid assumption. And by the way, all the assumptions we're having here are not all in-house but was well tested with external providers. Our assumption on EV to be more precise on your particular question, Raphael, so we are seeing in the next -- these days, let's say, approximately or maximum 1% from the fleet being electrical and hybrid is important. For the period to come in 2030, we assume that this fleet might reach approximately 20%, assuming an accelerated adoption of the electromobility. Ambitious or not, if you're looking to the European assumptions, those could be even more ambitious. But we believe that the attraction and, let's say, the increased rate is going to be relatively slower paced. Why we believe that after 2030, the demand is going to decrease because the efficiency gains, the electromobility, the promotion of the public transport, all of those will be adverse to the classical fuels and as well the bio component will further increase. So that's -- for us, the logical assumption, conclusion to believe that in 2040 we are going to see that decrease. Still, I was mentioning a bit earlier, refined utilization to the level of 95% in the end of this decade, 85% towards the end of next decade. On competitive evolution, so -- and our investments in the [indiscernible]; we -- as I was earlier mentioning, we believe that I was talking about the integration of our assets. And that gives us the confidence we use to have a high utilization rate. And to use those products, there's actually equity products being used and sold in our sales channels that gives us the confidence for, as I said, for these high utilizations. And the investments in the biofuels have just need to make our products more sustainable for this period and for the period to come. Is the refinery industry going to be under pressure in this decade and next decade? Yes. Who's going to close I guess is -- but I won't go for that. But obviously, the refiners are going to be on a scrutiny. But we believe that we have good grounds to run profitable business in the next decade. On the biofuels, we are going to -- you are asking me why do we go so late? We are going to go on a relative gradual adoption of that -- of those biofuels. So we are going to look into the biofuels development in the period to come, in the immediate period to come. And to be honest, if we see that there is a significant opportunity growing faster than we -- than most probably end of the decade, we can definitely accelerate all these programs. But on specific biofuels initiatives because we are not going -- we do not talk about a singular plant, we talk about more plants. We are going to -- or more investments. We are going to start those already in this MTP cycle that you are referring right now.

Thank you, Radu. Simona, back to you.

The next follow-up question comes from Dana Mandru from Swiss Capital. Dana, can you hear us? Okay. Then we'll move to Irina Railean from Banca Transilvania.

I have some more questions about Neptun Deep. Could you remind us a bit about the timeframe? So we expect final investment decision next year or up to 2023, then first gas 2026, 2027. And after that, is it correct, 10 years of plateau production of 70,000 BOE per day. And after that, possible natural decline period. This is what I understood. Please just confirm more correctly. And also about Neptun Deep is in your view, what will be the destination of the natural gas for -- will it be for export? How do you see this -- or where do you see the market for Neptun Deep gas? And regarding the power prices -- sorry, the gas price guidelines. I just wanted to better understand, is this guidance for the like on average for the 2022, 2030 or is this rather 2025, 2030? I mean longer-term assumption. And is this also this also could be seen -- is it also as an assumption for Neptun Deep gas prices. That was my question. And the final is regarding gas demand in Romania. I saw in the presentation, a 20% increase in 2030. Where do you see this increase to come from?

Thank you, Irina. I will take the first one with regards to the timeframe and some of your assumptions there and then Franck and to you for all the gas demand, gas prices and gas destination questions. But Irina, I think you summarized it very well. I think what we have always said is if the offshore or changes are made this year, then we believe it's possible to -- we would see being able to FID in 2022. However, in the event that the offshore line changes are not made this year we believe FID will move into 2023. And from FID until first gas is 4 years. And we have shared now the plateau of production is 70,000 barrels a day equivalent net to OMV Petrom plateau for 10 years and decline thereafter. So I think the way you summarized it was actually perfect from that. So with that, Franck, I hand over to you.

Yes. So sort of 3 questions on the gas, in terms of marketing of Neptun. So first of all, of course, we will look to market first in -- on the local market in Romania. And I think it's also linked to your last question about the demand. Of course, it will also depend on the situation on the supply demand in the horizon of 2026 or 2025. So there is also the infrastructure now in Romania, if there is an oversupply in Romania to be able to export the gas. But when we see it -- when the supply and demand will be close to the first gas to see what will be the situation on that. But what we are confident is it was also important for us in term of a decision of investment is our future decision of investment is to have infrastructure to be more in the case of oversupply to have access to other markets. And then we will look at the market where we have a better net back value for the gas. That's important for, of course, for the economics. In term of gas price scenario, what we are looking it's -- is a range of EUR 22, EUR 25 per megawatt hour I was mentioning is for the entire period of our strategy. And in term of the gas consumption, what we see -- and we see already an increase of gas consumption this year compared to last year. There is quite an increase of number of connection, which is important due to the economic growth, but also due to the increase of the network on the distribution side. So we see more household and more building connected to gas, taking market share from other fuels, fossil fuels, especially like coal and gas -- and wood, sorry, and [indiscernible]. So that gives confidence and we see this trend ongoing at the moment. Also, of course, the big volume will come from the switch from coal to gas. And here, it's part of the strategy of the national government in term of energy transition to make sure to reduce the CO2 in Romania and we can reduce by 60% by switching from coal to gas. So this will increase the demand and what we expect as well, but we didn't put in these numbers. But after that, is also the hydrogen demand in Romania, where there is a potential for blue hydrogen because as Chris was mentioning, carbon storage will be -- facilities we can see in the market. And when you look at the carbon price today, we are close to be already breakeven compared to gray hydrogen. So we are confident that there will be also an economy on the blue hydrogen.

Thank you, Franck. Simona back to you.

[Operator Instructions] We also have a follow-up question from Oleg Galbur from Raiffeisen.

The first one, in 2030, you estimated that the EBIT generated by low and zero carbon project should be in the range of EUR 200 million. Could you please tell us how much of this is expected -- generated by new technologies such as carbon capture, hydrogen and others? Second question on investments in the solar energy. Would current regulatory environment justify the planned investments in this field? And I'm asking in the context of the disappointments faced by investors in the wind energy in Romania, which currently are facing unfavorable regulation? Thirdly, again, on Neptun, of course. At least, I did my math and calculated the production costs for Neptun and I came up with $1.50 per BOE. So it would be -- if you could provide a feedback on this number. And also, I was wondering what level of taxes have you assumed for the IRR calculation for the project? Have you just taken the current royalty levels or have you also assumed some additional taxes? And last question on the production guidance -- the upstream production guidance for 2030. I was wondering whether it includes contributions from other new projects besides Neptun Deep? And if yes, how much? And let me just provide also very short feedback on the first question I asked in the previous round about the split of refining and marketing earnings. I understand that you are not willing yet to disclose this split. And I'm sure that you have your own reasons. But I was thinking that it would be peaky not to have a better visibility on the segment's earnings, especially with -- as I was trying to say, with the retail segment becoming the largest earnings contributor at the group level by 2025.

Thank you, Oleg and thank you for the feedback. [indiscernible] Alina, you want to talk about the EBIT low and zero, but maybe Franck maybe talk a little bit about the PV and sort of maybe the comparisons with regards to the wind side. Then let's come to the low and zero and then. Value of assets, Alina, do you want to take on the tax with regards to Neptun. And then we come back on to the onto the OpEx guide for Neptun Deep. So Franck, we start with you.

Okay. Thank you, Oleg, for the question. I think what you refer to is a situation in the year 2010, 2012, when there was the first wave of renewable power in Romania and where there was a green certificate scheme done by the regulator, which was very attractive at that time and maybe too attractive or very attractive. And then the regulator decided to change this. What we see today, which gives us, I would say, more confidence. In fact, first of all, the cost per megawatt of the technology has dropped quite a lot, especially solar. So if you look at 2010 compared to today, the drop of [ 5 megawatts ] drop and that's make solar more profitable than 10 years ago. Also, the power price, if you look at the situation on the power price, we mentioned it before, we are the peak, especially the peak power price when we produce with solar, is much higher what you get from the wind, for example, where you tend to produce rather during the off-peak hours. So that's also a benefit that we see today. And to be fair, we are quite glad that we can't get a profitable development and investment without having a regulatory support because this -- it's always a risk that you may lose it. So that gives us more confidence, in fact, to be able to invest in this technology. Now we may also benefit from EU Fund and the investment because we have the modernized form 10d that is a benefit to a few countries in Europe, about 10 countries. Romania is one of them. And this will help us to also to reduce the CapEx at the beginning or part of our CapEx covered by EU Fund, and you get it at the beginning when you take your final investment decision. You don't need to wait for a regulatory framework on that. So more confident because we don't need any support from the regulatory bodies. And we see today the cost per gigawatt, the power price, and maybe what I usually add as well, a strong demand from our customers. If we look at our customer today for energy transition for offsetting the CO2 footprint, they are looking for green power, so which also give us a guarantee of origin support for green power.

Thank you, Franck.

Okay. I will continue with the EBIT. So indeed, EBIT in 2034 low and zero carbon is around EUR 200 million. The part related to new technology is really minor there. If we refer to the hydrogen and CCS, so most of it comes from solar and biofuels. And related to the question on Neptun taxation, we have assumed already a modified tax-related to Neptun. So we believe that -- and this is why we waited so much for the change in offshore law because this is absolutely essential both from a perspective of stability of the taxation framework in the free market, but also from a competitive tax regime. So what we have used in the calculation is the latest draft available, which was published by the government back in 2019, which was an improved taxation versus what is today in the offshore law.

Okay. And the production cost, I must say, Oleg, we did much quite good, but not -- we're not exactly there, but in the range. So we are not that low as to production cost on Neptun Deep, but a little bit higher, but not at EUR 1.5.

And production in 2030 anything from outside Neptun Deep. Bulgaria and Georgia?

Yes. This is -- of course, we have some models also for Bulgaria and Georgia. There we will be doing exploration work at the moment. Next year, we're going to trade in Bulgaria as well. And the structures are similar to what we have seen in Neptun Deep and we're hoping for an exploration success, of course, at the end of the decade or so.

But in the end, their reliance on exploration success, Oleg, so not significant, obviously, at the 2030 stage if we -- because we have to see the exploration success for us. And all I say is we take note of your comment with regards to the importance of the retail business. We also do see that and we will take note of your request for more visibility. Thank you. Simona, back to you.

Dana Mandru from Swiss Capital also has a follow-up question.

I will -- I would like to insist a little bit on the realized gas price this year. Please just confirm my assumptions. So according to my computation, you realized a gas price of around RON120 per megawatt. I'm far from the actuals or I'm okay?

I'll say, we're not too far, we're a bit above.

Thank you, Franck. Thank you, Dana. Persistent as always. Simona -- anything else, Dana, otherwise Simona back to you.

We have another follow-up question from Raphael DuBois from Societe Generale.

One more question on Neptune and I feel sorry asking as I think the transaction between Romgaz and Exxon is not even inked. But do you see room for a third-party joining for a third upstream player or another industrial player to join -- to develop this game changer as you call it? And second question on renewable power, will you use project finance to boost the IRR, sorry, beyond 9%? And if so, what sort of gearing should we expect?

Thank you, Raphael. With regards to Neptune Deep, we look forward to the first transaction happening, Raphael, I think and we await that one and look forward to that hopefully being successful. I believe Romgaz has the GSM vote this week. So I think we should note shortly on that and look forward in the event that they get the approvals that they want to when coming into the joint venture. I think we will just start with that one for now Raphael. Franck, on the financing for renewable power?

Yes. When we're talking about the IRR, we're mentioning is the leverage under branch area. So yes, as we mentioned, we could increase this by project financing. But we have the equity and the cash to finance our project. Now we will, of course, look at it as part of this road map toward the [indiscernible] renewable power, if we need to do project financing or not. And that's how we say, we don't close the door on that. But I said today, we are talking about...

Thank you, Franck. Simona, back to you.

Our last question comes from Kian Huat from CSAM. Please allow me read it out loud. Given that CapEx is planned to be significantly higher in the coming years, how would the company range the following 3 priorities: CapEx gearing ratio kept at 20% progressive dividend policy.

I have my view. Alina has her view on that one. So to me and I'll start with the big picture and then hand to Alina from sort of the aspects of the financial frame is, one, I think we believe, fundamentally, that there is a big investment opportunity to create a longevity of OMV Petrom within the energy transition and support Romania in its role of its '55 within the European Union and the largest energy company in Romania. We feel that we have the investment opportunities with the rate of return to be able to do that. So to me, I would put CapEx at the forefront of that. Having said that, I think strength of our balance sheet, combined with our investment opportunities, allows us also, at the same time, to do progressive dividend. And I think that's why I think we feel our investment proposition is very, very powerful in that regard. With regards to gearing, I think that's for managing the downside price, should it happen, and we want to be able to maintain our investment levels, again, fundamentally because we start with a very strong balance sheet. But I will quickly turn to my CFO and make sure…

Very good answer. Yes, indeed. So CapEx is definitely our first priority. And then what I would add would be that we have tested exactly for this reason. We have tested our strategy for this downside price scenario, making sure that we can spend our CapEx and be able to give growing dividends and we are even in a downside price scenario, keeping our gearing ratio below 20% because we believe this is a healthy gearing ratio for our industry.

Jonathan Lamb from Wood also has a follow-up question.

Bottom of the barrel upgrading, but you don't say very much in detail there, what are your thoughts, what technologies are you looking at?

Bottom of the barrel upgrading and what -- I think the technologies or initiatives you have in mind there.

Bottom of the barrel is a special project in which we are looking into it and we have at least the options for government on the table, all of them pretty solid as of today, even bitumen, carbon black are 2 obvious answers of today. If you're going from a bitumen perspective, you can definitely see a significant demand for now and as well for the next decade. So we see definitely a good opportunity to develop at least one of those 2 projects towards this strategy period. And as said demand is there to be seen for the long time as well for the carbon black, for example, we see significant demand in Romania without having the production here. So we have at least 2 solid initiatives that we are exploring as of today.

Jonathan, I hope that answers your question. With that, Simona, I think we hand back to you.

Yes. Jonathan, did you want to say something?

Yes. I was surprised I didn't see ReOil anywhere in there, ReOil technology, Reoil.

Yes, ReOil is one of the options that OMV is exploring in a sense actually they move from demonstration plant to industrial plant. And it's definitely an option that we need to -- we could consider at a certain point in time. We need to see a more substantial developments on the side on OMV and could be sort of an option for the future. But on a specific topic related to the bottom of the barrel, those would be the 2 initiatives that we are looking into.

Simona, back to you. We have another question from Dana Mandru from Swiss Capital.

Yes. I already lowered the hand, but anyway, I'll ask the question. So regarding the OpEx per -- gas price, yes, probably -- is the realized gas price was RON110 per megawatt. This is clear. So let's go to OpEx per BOE. Yes, it's regarding the Neptun Deep. I just made the computation -- my implied level is around $4 per barrel. It's okay.

I need to think about the iterations.

It is a little high, it is a little low in the end.

It's a bit higher at the beginning, but average is good.

Thank you, Franck. Dana, did you catch that? Okay?

Yes, I'm okay.

Simona, back to you.

As there are no further questions, we are now closing the Q&A session. The replay will be available later today. And now I will hand back to Christina for her closing remarks.

Thank you very much to all of you for participating and for joining us today. We are very excited to present our new strategy to you. OMV Petrom is now setting up for the energy transition with a commitment to reach net zero operations by 2050. We also put forward the largest private investment plan in the Romanian energy sector, while targeting to increase rewards to our shareholders. We strongly feel we are on the right direction and we will all work very hard to make OMV Petrom a successful transition story. Over the next days, we will meet with some of you on our scheduled virtual roadshow. There will be more roadshows to come next year when we hope to be able to meet you either virtually or if we're really lucky, maybe in person. As always, for further information, please do not hesitate to contact our Investor Relations team. We wish you all the very best. Thank you very much for joining us today and stay safe.