Total SA Strategy & Outlook Presentation Investor Day 2018

Sep 25, 2018 PM UTC 查看原文

FP.PA - Total SA
Total SA Strategy & Outlook Presentation Investor Day 2018
Sep 25, 2018 / 02:00PM GMT

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Corporate Participants
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* Arnaud Breuillac
Total S.A. - President of Exploration & Production
* Bernard Pinatel
Total S.A. - President of Refining & Chemicals
* Laurent Vivier
Total S.A. - President of Gas Division
* Marie-NoÃ«lle Semeria
Total S.A. - Senior VP & Group CTO
* Mike Sangster
Total S.A. - Senior Vice-President of IR
* Momar Nguer
Total S.A. - President of Marketing & Services
* Patrick de La ChevardiÃ¨re
Total S.A. - CFO
* Patrick PouyannÃ©
Total S.A. - Chairman, CEO & President
* Philippe Sauquet
Total S.A. - President of Gas, Renewables & Power and President of Strategy-Innovation

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Conference Call Participants
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* Blake Michael Fernandez
Piper Jaffray Companies, Research Division - Senior Research Analyst
* Christopher Kuplent
BofA Merrill Lynch, Research Division - Head of European Energy Equity Research
* Christyan Fawzi Malek
JP Morgan Chase & Co, Research Division - MD and Head of the EMEA Oil & Gas Equity Research
* Henry Michael Tarr
Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst
* Irene Himona
Societe Generale Cross Asset Research - Equity Analyst
* Jason Gammel
Jefferies LLC, Research Division - Equity Analyst
* Jonathon Rigby
UBS Investment Bank, Research Division - MD, Head of Oil Research and Lead Analyst
* Lucas Herrmann
Deutsche Bank AG, Research Division - Head of European Oil and Gas
* Lydia Rose Emma Rainforth
Barclays Bank PLC, Research Division - Director & Equity Analyst
* Martijn Rats
Morgan Stanley, Research Division - MD and Head of Oil Research
* Oswald C. Clint
Sanford C. Bernstein & Co., LLC., Research Division - Senior Research Analyst
* Theepan Jothilingam
Exane BNP Paribas, Research Division - Head of Oil & Gas Research and Analyst of Oil & Gas
* Thomas Yoichi Adolff
CrÃ©dit Suisse AG, Research Division - Head of European Oil & Gas Equity Research and Director

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Presentation
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Unidentified Participant [1]
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Good morning, everyone. Microphone, yes, it's working now. Yes, good morning, everyone. Thanks very much for coming here today to the Total 2018 Strategy and Outlook Presentation ahead of the New York Stock Exchange. Very pleased to see so many of you here today in this fantastic room. I think it's the first time we've done this event in the stock exchange where we've been listed, I think, for over 20 years. So we have a busy today as I'm sure you've seen from the program. In the morning, Patrick PouyannÃ©, the Chairman and CEO; and Patrick de La ChevardiÃ¨re, the CFO will present the strategy and outlook, then we'll break for lunch and then we have a series of focused presentations in the afternoon by different members of the executive committee and other senior executives. I'm sure Patrick will say a few words during his introduction. I think before -- so before starting, I'd just like to get Greg from the stock exchange to give a security briefing and then we'll show you a short video of what Total has been doing this year as part of the World Safety Day, before handing over to Patrick.

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Unidentified Participant [2]
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Good morning, folks. [Greg Crane], Director of Security here at the New York Stock Exchange, and welcome. We are, currently, I think, celebrating our 226th year in existence. For those of you who have not been over to our facility before, welcome, and I certainly hope you enjoy your stay.

Just very, very briefly because I know you did not pay extra for this stand-up comedy show with me at the front of the room here. But we do want to highlight a couple of just important points regarding life safety here in the building. So there are 3 emergency stairwells that will be egress out of the building in the event -- in the unlikely event that there is a fire alarm sounding. The closest stairwell to you is actually out this door. And as you walk out the door to your right, you will see the B staircase right there. That is the closest emergency egress for you. The building also has a public announcement system, a PA system. So any event of an alarm you would hear some type of description from what we somewhat fondly refer to as the voice of God or in this particular instance, our fire safety director on site as to whether it would be a shelter in place event move to the closest stairwell for egress out of the building. Lastly, you will see stationed also outside this door as well as out by the elevator banks, you'll see uniform security staff. They have contact with our 24-hour security command center. In the event of any other life safety issues or security-related issues, medical emergencies, we do have defibrillators on site as well as some moderately trained emergency response personnel. When I say moderately, I'm not talking physicians, but we do have EMT trained personnel here on the side. So again, if you should need anything along those lines, please feel free to start with one of the security guards that you'll see posted in the area. If that person cannot help you, Maxine Daniels is your event planner here for this event, and she'll be able to get in touch with one of us for our response as well. So without anything further, thank you, again, for your time. Please enjoy your day. Please be safe, and thankfully, you're out of the inclement weather in what, I hope you'll find, is a relatively nice room for -- to accommodate your meetings.

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Patrick PouyannÃ©, Total S.A. - Chairman, CEO & President [3]
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Good morning, everybody. I'm happy to be here with you, and welcome you today in this beautiful room. Yes, it is the first time that we come to make a presentation to London. We celebrate -- I had the chance to celebrate the 20th anniversary of listings in New York by ringing the bell earlier in the year. I think if we came to New York, it's a recognition to the fact that our U.S. investors are, in fact, the largest group around -- among our investors, representing 32% to 33% of the capital of Total, followed by the French investor, 25%; U.K., 13%; European investors representing around 55% to 60% of the capital of the company.

I'm not alone today. We are prepared for a long day and a full day of presentations. I am, of course, with our CFO, Patrick ChevardiÃ¨re, that you know very well, but also with other leaders of the company, executive committee members. And because we will make this morning a global presentation, Patrick and myself, followed by a Q&A session. And this afternoon we'll have some focus on 6 topics, which we consider the core of strategy of the company. So it would be deported by Arnaud Breuillac, our President E&P, Arnaud is there; Laurent Vivier, our President Gas, who will speak about LNG, which, of course, is a big activity for the company. And then, we'll have on the Downstream, Bernard Pinatel for petrochemical strategy; and Momar Nguer, of course, for the future of Marketing & Services. Momar is there, fourth row.

And then to speak about the future, we'll have Marie-NoÃ«lle Semeria, who is our Chief Technology Officer, for speaking about technology and of with -- will contribute to the future strategy; and Philippe Sauquet will present forecast on the climate trajectory of the company, which is a way to come back on the whole strategy of the company.

We have lot of time. We have planned some Q&A this morning. And after every 2 sessions, this afternoon, you will have chance to ask questions. We have also the lunch. And for those who can stay with us, we have also planned to have a dinner with you, which will give opportunities to have many key questions and better explanations maybe about going deeper than the presentations themselves.

So starting with the strategy. We will have no surprise today, just to be clear. We don't change the strategy of a company like Total every quarter or every semester. I think it's well established. I would say the cornerstone of the strategy for me is the word deliver. And you will see that among -- along this presentations, the words consistently delivering will come back several times, because I think we insisted for the last 3 years that we need to be excellent on what we control; and it's a way forward. It's a condition precedent to be able to build the future of the company. And I think we can say that we have a track record in the company of reliable execution. And it's very important because it is the basis on which we will build the future of the company. So that's the first important message, it will be delivered, and continuing to deliver. We thank for this good track record.

Then, of course, strategy as if I tried to characterize it is another world, which is [important is] integration, integration of the full value chain. We have demonstrated there, again, the last 3 years that it's important in the whole value chain to be -- to not only to be along full value chain and that's -- Downstream is giving a strong contribution to the cash flows of the company. Of course, it's moving with the price of oil, but it's not moving, in fact, as we will see because we managed to maintain a good track record on the Downstream. So integration is a keyword. It's also the -- it's the one on which we built the strategy for the gas value chain, as you will see it; in particular, the LNG, which will go even Downstream to add the power and to go along the full value chain.

The other element on which we build our strategy is, of course, the anticipated market trends. It's -- they're moving in the energy fields. So it's not an easy exercise, but when you think to the future of the company, we want, of course, to position the group on what will be the growing markets -- energy market. And this, of course, is linked to the evolution of this trend markets. I think because of technology, because of environmental challenges; we'll come back to it.

And to execute the strategy, of course, we believe -- that's written there -- but we need to act. We need to act by being able to manage our portfolio and taking benefit on the low cycle to manage the portfolio countercyclically. We'll come back on this to demonstrate to you how we can create value for shareholders and profitability by -- with portfolio management. And, of course, also by -- I would say, playing to our strength to build the future of the company.

We'll describe you a group having evolution strategy today, which is, of course, mainly an oil and gas company, and we are proud to produce oil and gas. And we will add, as it's clear probably after some acquisition we've done in the recent years, what we've built, what we -- how we want to build a low-carbon electricity business, and we'll come back on it.

So that's today the program that we will develop in front of you. On one side of the consistently deliver, the objective we set to ourself for the benefit of creating increasing shareholder value; and then, strategy of an oil and gas -- a responsible oil and gas and low-carbon electricity company.

Safety. You've seen this movie. I like the movie because it pays tribute to all the men and women of the company, which are the core of all what I said. And when we speak about consistently delivering, it's not only figures; this is a lot of work of all the men and women in the group among 130 countries where we operate.

Safety is not only, of course, a question of respect for all the human people, who are human, who are working in the company; it's more than that. It's at the core of consistently delivering -- a way to consistently deliver what we want to deliver. It's a cornerstone of the operational efficiency. And we are, as you know, and it's clear, in Total, the fact that we have been able to improve our records in safety has a direct impact, is directly linked to the better availability of the plants, to the better maintenance of the plants. All that is linked. The way we work on safety is an intuitive approach, which is described on the right slide -- right side of the slide, which is we learn to improve. We improve -- we learn to improve, we learn from near-misses. We, of course, learn from accidents in order to improve together and to establish a new baseline and to start again this intuitive approach.

What we've done in the last few years is also to have a unified approach of HSE for the whole group. And it's -- today, we have a single group-wide HSE team at the top of the company; and with the idea that we need to take the best -- to take best practices along -- among all these various activities that we have in the group. And this unified approach of the group is also something symbolic of the way we have, I would say, tried to simplify and to better take value of being 100,000 people around the world, many activities. But to attract, I would say, maximum value of being together.

I will move then to 3 slides about the markets. As I told you, it's very important, when we speak about strategy, to see how we can see the evolution of the markets. I will not forecast any price of oil because it will be wrong. What is clear is that when we look to the oil market, we are facing today some supportive elements of the oil markets. Last year, when I made this presentation, I think we were around $52 per barrel, today at $80. Of course, the context is not the same. Probably easier for me to speak in front of you. But let's be clear, I don't -- we don't believe at all that there is -- anything is given through -- and in the industry, the markets will remain volatile on the long-term. Having said that, it is clear that the demand is strong -- it's still strong.

Speaking -- IEA is speaking about plus 1.4 million, 1.5 million barrel oil per day this year, and anticipate for the next 5 years demand -- higher growth of demand -- yearly growth of demand higher than 1 million barrel of oil per day. Of course, the prices of oil could influence negatively this demand. We see in some emerging countries that subsidies have to be increased. This could be -- this could measure demand if the price continue to grow. We see also -- we could anticipate also on the demand some impacts of the, I would say, the trade wars, which are -- could damage global economic growth. Having said that, the demand for oil is continuing to grow at a quick space -- quick pace, and this is an important element, which supports the price today.

On the short term as well, we have some -- on the supply side, we have seen that OPEC and Russia are aligned again and are taking back the leadership in the market, quite efficiently. At the same time, the U.S. shale oil, which was supposed and people were thinking to flow into the market, is facing some bottlenecks on infrastructures. This will not last; but at least for 1 year, I think probably next year at the same time, we'll have some -- the infrastructures will be built. But until there, this production cannot flow us easily in the market that it was planned.

And since we met last year, of course, some political decisions have been taken by the U.S. as well towards Iran, which has a direct impact on the exports of Iran. And it seems that reduction of exports could be even more stringent than what was anticipated. And we have also in this world some countries like Libya and Venezuela, where the production has some hiccups. In Venezuela, unfortunately, it's a continuous declining production, but we can face.

I would say on the supportive side for the oil price, we have on the -- if I think to -- it's also the level of investments, the last 3 years. Obviously, most of the companies around the world have been advised to be prudent, so there were not many sanctions of new oil projects. I -- we see that the companies are still prudent for -- what we announced for -- what we do in 2018, 2019. This, as you see, are some impacts on the oil production capacity for the next 3, 4 years, which will support the price. Having said that, we've seen a very volatile market: again, $42 in August '17; more than $80 today for the Brent. So it's almost a multiplication by 2 in 1 year. It's better to be in that position, but we could face some downturn in the future.

So for Total, that means that we continue to strongly believe that the best position into this type of commodity market is to look to a breakeven and to be disciplined and to select the projects on the -- more on a breakeven basis rather than on betting on high prices. The gas market, of course, has changed quite -- the vision of gas market in 1 year, has also changed quite a lot supported by the strong demand coming from China primarily and other Asian countries, like Korea. One year ago, the market was anticipating some of the supply because the wave of Australian projects coming into production.

This year, in fact, all that was -- has changed, picture has changed because of the Chinese policy, which has been reaffirmed at the top of the country with the objective for China to grow the share of gas in its energy mix from 6% to 15%. This could represent -- this would represent big amount of LNG to be imported in China. Of course, the gas production in China could grow, but in Russian -- and you have some Central Asia and Russian gas pipeline as well, but we would need more LNG. And, by the way, the LNG demand in the first half of 2018 has increased by 50% compared -- in China, compared to the first half of 2017.

So this is a large growth. We anticipate at least 5% per year for the next 15 years. This explain, of course, why Total has positioned itself strongly into that market. And when you look to the supply side, I would say, there is room for new projects, even -- not only room. The market will need new projects by 2025, by more than 2030. And so that's, of course, is supportive of the strong strategy in the LNG business.

The last slide that we introduced for the first time this year on the market is electricity demand. Why? Because, of course, when you speak about natural gas, and our strategy is quite driven by natural gas. At the end, this natural gas is used to, in particular, to provide electricity. The electricity demand in any scenarios -- we are not expert of electricity, but we consider all the IEA scenarios -- will increase by at least 50% in 25 years, more than 2% per year.

And more importantly for us is that when you look to the graph, what is impressive is that in all the scenarios, the origin of this electricity will be mainly low-carbon electricity, either natural gas or renewables. And this will represent -- this will be -- will double as the share of natural gas and renewable will double, which represent a big increase and big growth.

And of course, for energy companies, oil and gas companies, we cannot -- we have no choice than to face -- that to integrate through climate change in -- towards long-term strategy. And this electricity demand growth is representing an opportunity to further expand on integrated model into this evolving low-carbon energy market. And we will come back on it, but figures of growth -- this is clearly the highest growth in the energy markets, which is offered by electricity.

So then I will give the floor to Patrick, which will commence all the teams of Total management, who consistently deliver on the objective we set to themselves.

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Patrick de La ChevardiÃ¨re, Total S.A. - CFO [4]
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Good morning, everyone. This morning, I will start by reviewing our recent performance and try and highlight some of our key objectives. Our track record of consistent delivery since 2014 differentiate us from our peers. We set ambitious objectives, and we achieve them. And as a result, we outperform our peers in the market. This track record of success is built on a foundation of disciplined management. In the company, there is accountability; and we demand safety, cost, execution and delivery. So let's have a look to the numbers.

Here are full -- 4, sorry, of the main objective we set. The back shows the performances, the black line shows the objective and the initial targets. In every case, we have consistently delivered. And to energy company, we concentrate mainly on managing the cash flow, and this has been a necessity since 2014. Over the 3-year period, we increased production by 20%. We improved margin by cutting OpEx from close to $10 per boe to -- in 2014 to $5.4 per boe in 2017. We managed organic CapEx down by more than $8 billion a year, and we announced on its asset sales of $13 billion. And this performance demonstrates discipline management through the organization.

Total is known for delivering outstanding production growth. In 2017, we started up 5 major projects and increased production by 5% to 2.57 million barrels per day. Taking the benefit of the well-timed acquisition, plus next wave of start-ups, we target best-in-class production growth of 6% to 7% per year on average from 2018 to 2020.

This is possible because of new project, which -- and I will talk about next slide, which represent more than 600,000 barrel per day, let's say, about 20% of the 2020 production. Of course, this was due to M&A over the 2015-2018 period, like new contract in Abu Dhabi, like the acquisition of Maersk Oil and the alliance with Petrobras. It will represent -- both acquisition will represent close to 700,000 barrel per day of projected 2020 production.

We anticipate, and this is one -- something we repeat every year -- we anticipate relatively low decline rate of about 3%. This is due, as you know, to the high proportion of stable long plateau production that we enjoy in our portfolio, about 50% of it is long plateau. For the 5-year period, 2017-2022, we confirm a production CAGR of 5%. And this is consistent with the growth rate of 3% to 4%, post-2020.

Taking a closer look to the new projects. On this slide you have in blue the project that are started. There are 7 of them. And you have, in addition, 12 more that are scheduled to start up by 2020. These new field -- and this is important -- these new fields are accretive to our average cash flow per barrel. On the right, we compare the new start-up of the average cash flow per barrel of the IOC based on a WoodMac data. These project generated $50 -- I mean, our Total project generated $50 Brent; what the IOC generate with $60 per barrel Brent. In our $60 per barrel Brent base-case, these project generate about $20 per boe of cash flow. At Total, our strategy is to emphasize value of our volume. We will benefit from this production growth, but it is equally important that we are improving the cash margin and profitability per barrel.

In every commodity business, there is a constant battle against inflation, and we are relentless in our cost-reduction program. Compared to the 2014 base, we cut our 2017 OpEx by $3.7 billion, well above our initial target of $3.5 billion. We increased our 2018 target from $4 billion to $4.2 billion. And our 2020 target is to reduce operating cost by $5 billion across the group.

I must emphasize the point that we are cutting costs while we are growing the company, which is not obvious. Upstream represents more than half of the cost reduction. So here, again, you can see how important it is to add low-cost production to the portfolio. On the right, we show the target production cost per barrel. And you see that we are roughly stable at around $5.5 per boe. To continue to achieve our cost-reduction target, we are concentrating on improving efficiency across the group in part by consolidating shared services and implementing innovative digital solution to cut costs. And there will be a presentation by Marie-NoÃ«lle to show you those high tech.

We have an ongoing effort also to simplify our processes and our organization. Total Global Services or TGS was created to make sustainable improvement in efficiency by centralizing and consolidating shared services through the group. In 2017, TGS generated saving of about $400 million. The target is to save $1 billion by 2020. Along these same lines, we launched a group-wide program to simplify and streamline the organization. The idea behind the One Total, this simple program is to promote efficiency within the group. One Total Chairperson has been nominated in any country in comparison to 1 representative per branch. The cross-segment support function has been consolidated under Total Global Services.

The discipline on cost and efficiency carries through to our capital investment strategy. We confirm our CapEx in the $15 billion, $17 billion per year range for 2018-2020 period, so nothing new. And for 2018, we narrowed the target range to $16 billion to $17 billion earlier this year. What is new here is the reconfiguration of the business segments, on the right. We have moved essentially the LNG related natural gas producing activities from E&P and include them in the new integrated gas renewable and power segment, or iGRP. And you see that on the right side.

For 2018-2020, capital investment split is about 55% to 60% for E&P, 25% for iGRP, and 15% to 20% for the Downstream, which include Marketing & Services, and Refining and Chemical. Cost inflation has not been an issue for us to this point. And we believe that there is ample availability of services to meet the needs of the industry. We don't talk in -- about it -- about the bottleneck that we can see on the U.S. onshore activity. Based on our current project slate and cost environment, we are confident that our CapEx target to 2020 are sufficient to cover the projects that we are presenting today.

A word on exploration. In late 2014, if you remember, we reevaluated our exploration strategy, and begin to bring some outside people. We rely on exploration as part of our resource renewable strategy, and exploration is starting to deliver. Ballymore on the left is a giant 500 million to 1 billion barrel oil discovery in the deepwater Gulf of Mexico. Sururu in Brazil is a giant deepwater oil discovery. A6 is offshore gas in Myanmar that we will be able to develop for our Yadana field. And Glendronach is offshore gas that is close to Edradour and Glenlivet, so we should begin to monetize it quickly. These discoveries are strengthening our position in key areas. On top of that, we maintain an exploration budget of $1.2 billion to $1.3 billion per year.

So we talk a lot about Upstream, which is in a great shape. But you should also remind that Total Downstream is the best-in-class company among the major. Downstream has been remarkably consistent in delivering cash flow of around $7 billion per year through the cycle and despite the sale of $7 billion of asset in the past 3 years. Optimizing refinery -- refining and chemical is a constant and ongoing process. We are improving plant availability. We are reducing our European footprint. And in 2018, for example, we include upgrading Antwerp and debottleneck SATORP, our 2 largest platforms.

Marketing & Services is a different type of business. So the strategy there is to expand in high potential areas. Marketing has grown their cash flow contribution by about $100 million per year on average since 2014, and we expect it to be $2.2 billion by 2018. Our Downstream provide reliable stream of cash flow, $7 billion per year, and generate best-in-class ROACE of more than 25%.

I think this slide is quite key to understand what we have done in the company. The most impressive accomplishment, I can show you, is the speed and magnitude of our progress in driving down the breakeven. By 2014, we needed a Brent well above $100 per barrel to cover CapEx and dividend. By 2017, we cut that down to about $50 per barrel, which is about where we are this year. This has been possible by maintaining a strong discipline on spend, both on CapEx and OpEx; by growing high-margin Upstream production -- a good example is the acquisition of Maersk; plus a continuous contribution from our robust Downstream activities.

In the current environment, we are generating, obviously, a very strong cash flow. And with the lower breakeven and higher-margin production, along with the new start-up from our acquisition and organic, our Upstream sensitivity to oil price is increasing. From $2.8 billion a year for $10 per barrel exchange in Brent in 2018 to $3.3 billion by 2019 for $10 exchange.

This is a slide we design and we select very carefully the item we will show to you because we are the best everywhere on this one. And to close this section, this is the benchmark and I particularly enjoy it. We are consistently delivering on an ambitious set of objectives. Upstream continue to set the pace for production growth, and the production growth will drive the increasing cash flow with the fact that we are adding accretive barrels. Downstream continues to deliver best-in-class returns. Overall profitability is improving with return on equity above 10%. And our gearing at 16% at midyear is well within our targets.

So that ends my presentation. I will leave this slide so that you can check it carefully.

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Patrick PouyannÃ©, Total S.A. - Chairman, CEO & President [5]
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Yes, so I think Patrick has demonstrated to you, have we full discipline management in the company. It resulted in a significant reduction of a breakeven, which is fundamental, again, because we don't control the prices, but we -- this is what we control. And this is something on which we worked hard; and which will be, again, is a core of -- strong foundation for building the future of the company. And by doing that, we created, I think, a sustainable advantaged positions within our peer group.

And so now I will move on, I would say, developing more about how we can create value in the future, and there will be 2 parts in my -- in this presentation there. One will be, how we can create additional value for the cycle and the other one will be how we can do that by playing to our strengths and growing on the -- and positioning the group on the growing markets.

So first, to create value through the cycles, there are 2 ideas that we put -- that we -- on which 2 levels there. The first one, of course, is that when we have some cycles like the ones we experience, we had some opportunities -- M&A opportunities. And you can capture them under the condition that you have a strong balance sheet and that you are in better shape than some competitors. I will come back on it because this is what we've done. The second levels when you got cycles; of course, when you have low cycles you have lower costs. And this, of course, gives opportunities to sanction new projects to prepare a future base of assets in better conditions and better profitability for the future.

So first about M&A. It's clear that we have been quite active. We have acquired around $15 billion of assets. We sold some assets as well. But when we made -- we prepared this presentation, we realized that, in fact, in the last 3.5 years we have moved 25% of the portfolio. We have been able to acquire 7 billion barrel of resources at less than $2.5 per barrel, so a very low cost of acquisitions. And the table on the right of the slide show you that with acquisitions, these M&A activities has, in fact, enhanced the global value of our Upstream portfolio.

Your first column on -- the gray column show you is, what is characteristics of this balance, which have been acquired in terms of profitability and costs; compared to on the white column, what is the average of the E&P portfolio. So you see that the ROACE share of these assets at $60 per barrel is above 10% compared to an average for E&P of 7% to 8%. The OpEx per barrel is at $4 per barrel compared to an average, which is already low at 5.5%. So when we told you that the strategy was to develop low-cost barrel, this is a proof. The second, by the way, is even more impressive on the technical cost, which means OpEx plus DD&A, which are at an average of $12, $13 per barrel compared to E&P average of $19.

And last but not least, which is even more important, the organic cash breakeven is under $30 per barrel compared to an average of E&P portfolio of $35. So this has been, of course, we have been opportunistic, to be able to capture this barrel during these low cycles. And this, of course, give a base for the future -- explains why today we have a competitive advantage in terms of cash breakeven, even our OpEx per barrel and even in terms of profitability.

Coming back on what we've done in the North Sea sometimes and the value we can create by this type of activity when you do that at the right time, Maersk Oil acquisition is clearly accretive. We spent $7.5 billion last -- this year in March. And of course, when we closed the deal, the acquisition, the barrel was not at $50, but it was at $75 per barrel, which helps. And as you can see on this chart, in the next 5 years, in fact, at $70 per barrel, we will get $10 billion out of these acquisition of 7 -- which costs us $7.5 billion. In fact, for the next 2 years -- 2, 3 years, we'll have -- as one of the operation will stop in Denmark, we'll be able at $70 -- at $80 per barrel, so payout of the Maersk Oil acquisition is around 3 years only. So this has been opportunistic.

Remember, I remind you as well that there are some synergies there, but we planned initially $400 million. We increased it to $500 million. We are well on track in Copenhagen; everything has been done very efficiently. In less than 4 months, a new organization is put in place, including on the staff side. In U.K. as well, we have reshaped full organization of U.K. subsidiary and the synergies are being delivered, and there is here more to come.

This acquisition of Maersk Oil gave us also the opportunity to high grade the portfolio -- North Sea portfolio by engaging M&A -- I would say, a portfolio management activity quite intensively. In fact, Maersk Oil has brought to us some, I would say, young assets, a new base of assets: Culzean in U.K., Johan Sverdrup in Norway, and the Tyra redevelopment in Denmark, which are the technical costs around $20 per barrel. And compared to some existing assets, the average portfolio of Total was at $25 per barrel. But which gave us the opportunity to divest some of the high-cost assets we had, like in Norway, Martin Linge and Gina Krog.

Some small discoveries, recently, we divested as well through U.K. BP. And we have put on sale package of U.K. asset, which represent 40,000 barrel per day of productions, which will be marketed in the coming months in U.K. in order to rationalize the operation.

In fact, there is another logic behind all that is, as we have large -- to lower the breakeven, it's better to have a larger base of operation to amortize your fixed costs. And this is what we have done in U.K., where we are rationalizing our base of operation. We announced this morning that we are acquiring a share of Chevron in Danish Underground Consortium in Denmark. And so this is, of course, a good opportunity for us to increase our share on operated asset from 31% to 43%. And I think it's one of the strategy, of course, that just needs to have a larger share of participating interest on the assets we operate, and this will help us to continue to drive down our breakeven.

So this is the type of value-creation we can do from not only the acquisition per itself by being -- doing it at a right time, but also by then managing the portfolio in order to, again, enhance its quality.

The other part of the benefiting of cycles, like Patrick said, is that we are facing a favorable cost environment to sanction new projects. I know that it's different, here in the U.S., that we see some inflation in U.S onshore. But on the international arena, I would say, it's not true, in particular, for Total, where we have a lot of activity and projects to sanction in deepwaters. So deepwater rig utilization rate is still quite low. We have a spare capacity of almost 50%. And when you look to Korean yards or Chinese yards, it's even lower than 50%.

So I know that the service industry would love to see a more intense market, but it's not the case. In fact, we benefit from the fact that they have built -- large capacities have been built during the boom when the price of oil was above $100 per barrel. And this, of course, is still there. And the global, can see on the chart, the global decrease of capital costs between 2014 and today is around 30%, where you can observe a small inflation somewhere, but is very limited.

So this is -- this means that we need to benefit -- to take benefit from this cost deflation to sanction new projects. And in Total, we have -- I would say, we have 2 [axes] for the strategies. The first one that we mentioned last year to you, is that we have accumulated -- because we are very disciplined in the way we are allocating in capital -- we have accumulated in the company 1 billion barrel of short-cycle resources. And so one of the instructions we have given when we looked to the price at $70, $75 per barrel to our subsidiaries is that they can look again and sanction quickly some of these barrels. And we plan to sanction around 400 million barrel of resources by the end of 2019 at CapEx of lower than $7 per barrel.

What are these barrels? There are many tiebacks, infill wells, in particular in West Africa, where we have, in Nigeria, in Gabon, in Angola, a number of these projects. This is a good opportunity for us. It represents quite a large field. In fact post-2020, this will be translated in additional 100,000 barrel per day of productions at -- which will deliver more than $30 per barrel of cash flow at $60 per barrel.

The condition to be short cycle, of course, is to be able -- and this is the instruction we gave to our teams -- to be able to relinquish our rigs in case of reversal in the oil price. But as you can see, in terms of value creation on the chart on the left side of the slide, we will invest around $2.5 billion to mobilize these barrels. And this, at $60, $70 per barrel, will create $4 billion in the next 3, 4 years, between 2019 and 2022. So this is a type of activity which is clearly helping also to enhance profitability and the added value of the company.

So second activity is the large projects. We have, and on the chart, a number of large projects. 25 projects are mentioned on this slide. And of course, it's time to sanction them. They would represent, if we are able to sanction all of them by 2020, which is the objective, more than 700,000 barrel per day of new production. We have already sanctioned 6 of them. They are the little -- the yellow ones; 2, 4, 6 of them. And so we still have a lot of work to be done by the teams of Arnaud.

And when you look to the projects, there are the characteristics -- I will come back in the next part -- characteristics, of course, quite a lot of deep water in Africa, in Nigeria; but also in Brazil where we have built a strong position with Iara, Lapa and all the cities of the Mero developments. In the Gulf of Mexico, Patrick's talked about the discovery of Ballymore, but we have also other projects: Anchor, North Platte. So these are deepwater projects.

There are also some LNG projects; we'll come back on it. [I'll take 2]: Cameron LNG extension, Nigeria LNG, Papua LNG. And of course, other ones like the one in Uganda, the 2 projects: Tilenga and Kingfisher in Uganda, which will be sanctioned next -- beginning the first half of 2019. So these are activities which would benefit from a favorable cost environment in order to build a base of assets and of production, which will deliver some value post-2020.

This was a cycle of -- can be the benefits of the cycle. And then to present you of we -- how to grow, to benefit from the growing markets by playing to our cost strengths and building a responsible energy company. I think the market trends -- I commented the global markets at the beginning of the presentation -- when we look to how do we translate that for Total and how do we integrate climate into our strategy by taking into account these anticipated market trends of an evolving low carbon energy world, we are looking to what is the most disruptive scenario of international (inaudible) for an oil and gas company like Total. We don't say that it will happen, but if it happens, we have to take it into account. The good news of these scenarios is that natural gas market will continue to grow; and this explain why we are offensive, aggressive and expanding the company along the gas value chain, in particular, in LNG.

On the contrary, the oil market could stabilize, even decline. I don't know if it will happen because as we observe today, we still see a strong growth demand for oil. But there are some trends; and in that case, it's better -- and this is why we focus the oil projects of the company not only upstream, but also downstream, on the low -- looking to their breakeven on low breakeven oil projects.

And the last part, of course, I mentioned it, is that there is a large growth in the electricity -- low-carbon electricity either from renewables or from natural gas, and we want to develop a profitable and sizable business in this low-carbon electricity.

If we do all that, if we do all that, of course, we will be responsible; and responsible means that we'll be able to continue to grow the company, and I think it's important. It's not at all -- there is no idea in Total to shrink the group; it's to continue to develop oil and gas business and also to develop a position in this low-carbon electricity business; but at the same time, to be able to reduce the carbon intensity of our energy sales.

And this is a way to look at it. So there is a possible way there, which we'll describe, we will introduce -- we are publishing today our third annual climate report. We introduced a new indicator, which now has a -- is even firmer than before, the carbon intensity of energy sales, with -- which is -- which will -- and we set a target to ourselves; and we think it's possible, and we are committed to that, to be able to diminish this indicator, to diminish the carbon intensity of those sales by 15% between 2015 and 2030. And beyond 2030, we could reach a reduction of 25% to 35%, depending on new technologies, depending honestly on public policies.

Just to illustrate the strategy where we could, on the long term, target in terms of possible sales mix for a company like Total, this means that by 2040, we could have in all sales, natural gas will represent between 45%, 55%; oil, including biofuels, around 30% to 40%; and low-carbon electricity, 15% to 20%. This would represent a clear, positive and responsible contribution to tackle the climate challenge. The world today is not on minus 1% per year, it's more of plus 1%, in fact. This is reality.

Of course, there is a link, a direct link with our strategy; and it is, in fact, the result of how we anticipate the market trends. And we want to put into actions our strategy by improving our operations' efficiency, so natural gas, low-carbon electricity, biofuels, and investing in carbon sinks. Philippe Sauquet will come back in more detail this afternoon on this strategy, a climate road map that we intend to put in place, which again is directly linked to the strategy we developed.

In oil and gas, to build the future of the company, we build -- we play to our strengths. We identify some key areas where we have some expertise, I mean, 4 core areas of competencies: in deep water, in LNG, in petrochemicals, in retail and lubricants. And we are recognized worldwide. And we have also some geographical areas where we have some advantaged position like in Africa, where we are a clear market leader; in Middle East and North Africa, where we have developed very strong relationships with many NOCs, national oil companies, which help us to have access to some of the resources and develop the group; and also last, but not least, at North Sea where we have built a strong position of operating position by being the #2 and operating around 500,000 barrel per day.

So to -- this will be -- these competencies will be described more precisely by my colleagues this afternoon. I would just give you some hints of what is the strategy in each of the segments, the core competencies.

So on deepwater, yes, we are a leader in Africa, but we are -- we have established a new strong base in Brazil. We have been the early mover, I would say, in Brazil. And when you compare what we spent, we've established a position on Lapa, Iara and Libra, compared to what is spent today to acquire some exploration position, I think we were right to be early mover. It would represent something like 150,000 barrel per day of productions and probably more to come because we have some ambition to build on these -- on the position we created with Petrobras.

And the other part, of course, deepwater, an area where we could leverage our expertise is the Gulf of Mexico, which was mentioned. Arnaud will come back of it. As you can see, we are producing today around 350,000 barrel per day. But this segment, this deepwater segment will provide some growth in the future by growing to 500,000 barrel per day by 2025; where, again, it's important, with cash flow from operation, about $30 per barrel and $60 per barrel.

I know there is a debate about deepwater against shale. You can do a very profitable business in deepwater providing your targets on giant fields or -- but you are able to tie back your discoveries to existing infrastructure. And these are the 2 ways to leverage what we want to leverage in the future to create value for deepwater expertise.

After that, we have the LNG. Of course, 2018 is very important for us, with the acquisition of ENGIE LNG, which promotes -- promote Total as clear #2 into the market. We've -- we will manage 40 million tonnes of portfolio, 40 million tonnes per year of LNG; it's more or less 10% of the world market. We intend to keep in the future, to maintain this position of 10% of the world market in the LNG business. On -- it's a full -- it's an integrated value chain.

Of course, we look to production and liquefaction. We will produce 20 million tonne LNG per year. And you -- we will see that we have projects to continue to grow to 30 million tonne per year of LNG. Ichthys and Yamal are ramping up. The trading and shipping, I just mentioned, we are #2 in the world. Regasification is important. For the ENGIE acquisition, we are controlling -- we are clearly the #1 European player, which is important in this business because Europe is a clear liquid market; and to have access -- to have an easy access to this market is helping us to manage the global portfolio. And the integration is going downstream to gas and power marketing. I will come back on it.

So we are -- and Patrick -- and we announced that in February. But after the acquisition of ENGIE, we're intending to report differently on the financial reserves of the group. Patrick just mentioned it. So we will create from 2019, and we will report on what we call iGRP, Integrated Gas, Renewables and Power.

In fact, the idea behind it is that you will see -- this represents a combination of the existing gas, renewable and power branch reserves plus all the LNG upstream and midstream assets, which are today in E&P. The logic behind it is these are the, I would say, the core businesses in which we invest, part of them, either LNG or low-carbon electricity. And we want to identify in our reporting this segment as being one which will grow. And I think it was a request from many, many years, we heard that from our investors, to have a better visibility and transparency of what this Arctic gas LNG can deliver. You will have this from beginning of 2019.

So yes, we feed on our project's LNG expansion. We have -- and I would say I've seen that Philippe has used a nice expression in Barcelona last week about the golden triangle of where we can produce LNG. I don't know if it's a golden triangle or a golden square, in fact, because we have 70% of the LNG worldwide. We'll be concentrating in 4 key regions: the Middle East; and Oceania, Australia and Pacific; and then the U.S. and Russia. And Total, in fact, has -- we have built some positions, and we are very well positioned in all of these key areas to build off for the next wave of LNG projects.

The next wave of projects for Total will also be characterized for, a part of it, quite a lot of it, a number of them, as low cost and brownfield projects. What I mean, brownfield projects is building, being able to develop some additional trains based on the existing infrastructure. It will be the case, of course, in the U.S. We've -- ENGIE LNG gave us a share of Cameron LNG, which will be put on stream next year. We intend, with Sempra, and we are in full agreement with Sempra to expand quickly with Cameron LNG operations; there are 2 trains which could be mobilized. It's of course value-rising, low-cost U.S. shale gas. It's monetizing the existing infrastructures. In the U.S., we are also shareholder of Tellurian. We consider this opportunity for the future in light of the Cameron offshore expansions.

In Russia, we'll come back later on that, but we have signed -- we are very happy of what is the Yamal momentum, and you've seen that we signed an agreement, which is not only the entry of Total in Arctic 2, and by the way, we are shareholders of Novatek at 19.4%. I can announce today that last week, we reached -- the historic agreement was we would reach, one day, 19.4%. We reached that level last week.

And this, by the way, is an interesting story. We spent $6.8 billion to acquire this position in Novatek. We receive, in the meantime, around $800 million, $900 million; so $6 billion. The value of this participation today is $9.3 billion. So in terms of value creation, I know that people consider there is a risk on Russia; but Total has been able to identify, almost 10 years ago, one of the player. I know that people will have some doubts, but this player is growing quickly. And the last agreement we signed in June is not only positioned in the Arctic 2, it's positioned direct investors in all the projects to come. And Novatek is announcing an addition to be able to produce 56 million tonne per year of LNG by 2030. So this is, for us, very important.

Of course, we have also going around the square, golden square, we have in Oceania, the new Papua LNG project, which would be developed in synergies with PNG LNG and ExxonMobil. And we have also a project in Nigeria, which is brownfield developments. It's 8 million tonne per year project. It's not only 1 train; in fact, it's more or less 2 trains on which we work together with our partners.

And last but not least -- but this will be a tender, of course -- Total is very interested; there is no mystery to participate to the future expansion in Qatar where we have a strong legacy position. And it's obvious that in terms of competitiveness, LNG in Qatar, we have a very conventional offshore gas production, one of the most efficient, combined with long expertise and some synergies, is delivering one of the best, if not the best, competitive LNG for the future.

Petrochemicals, a word about it. Bernard will come back on it this afternoon as well, more in detail, but we are executing the petrochemical strategy we described last year. I would say there are 3 components, 3 levels on which we build this strategy. So first one -- and I will not describe the project, Bernard will do it this afternoon, but first one is to concentrate on projects or investments on the large integrated platforms. We have 6 of them, and you will see that the 3 of them, the 3 large projects, which we work today are based on consolidating and developing and synergizing these platforms.

The last one being set up is Saudi Arabia, which, of course, beyond the refining, the refinery project, which is a success, will offer us a capacity to have a large petrochemical expansion. The second level, as we mentioned to you, is access to low-cost feed stock. And this chart is interesting because it shows you that by 2025, 60% -- more than 60% of the petrochemicals production of Total will be based on ethane or LPG's advantage feedstock. And the last level is -- last target we have is to lower our exposure to Europe. We are very European-centric in our refining and petrochemical business, are more than 60%. By 2025, Europe will represent less than 50%, 45%.

A word as we speak about Refining & Chemicals, because we know that we have any questions about what could be the impact of the new IMO regulation on Total business and results. I think globally, in fact, the result of the analysis is that we are very well positioned to benefit from it and to enhance our revenues by few hundred million of dollars. Why? Because, in fact, this IMO regulation, which, I'll remind you, oblige in the American world to use low sulfur bunker fuel, will have some impact on the market. On crude oil first, of course, this will enhance, increase the value of low sulfur crude oil. And Total, in this portfolio, we have 60% of low-sulfur crude oil compared to an average of the -- in the worldwide production of 40%. So we have an advantage there, but these 900,000 barrel per day or low-sulfur production will have an increased value after the IMO implementation.

On the product side, I think it's obvious that this IMO regulation will have 2 effects: One, it will decrease the value of high sulfur fuel oil because the market will be reduced, but at the same time, it should increase the distillate value because it will be the best way, one of the ways to have -- to fit with the -- to fit to the regulation. On our sulfur fuel oil, in fact, we have many actions have been taken. We were producing in 2017 7 million tonne per year. So of course, we need to decrease this production, and this chart is showing you that for the Antwerp modernization, the Port Arthur coker, but also because we can segregate better in our refineries a way we produce high-sulfur oil or low-sulfur, we can reduce it to -- from 7 million to 3 million tonne per year and even we could some flexibility to go down to 2 million tonne per year. So in fact, at the end of the day, we will a very low fuel oil yield, less than 5%. So the decrease of high-sulfur fuel oil should not hit as a result of refining and chemical branch. On the contrary, because we have high distillate output, 50%, we should benefit from the increase of the distillate value.

And the third consequence of the IMO regulation will be that it should give some impulse to alternative fuel and in particular, LNG for bunkering. And Total has been one of the pioneer on this business. And I think that this afternoon, Momar will come back on -- and will come back on this activity.

Moving to marketing. We said -- I said to you, we have 4 areas of core competencies, one of them is retail and lubricants. You can see that we continue, and I know there are questions about the future of the M&S, but Momar will demonstrate to you, but we have plenty of ideas to continue to develop the value of M&S. But what we do in particular is we move to growing markets. In fact, there is a split there of the way we create some -- the $2.2 billion of cash flow, which will be delivered in 2018 by M&S. In terms of what are the legacy business, with lower growth, European retail, heating oil. It's less true for lubricants because there, you can have some growth in lubricant business. But we have, in fact, in the last years, made some M&As to reshape a little the portfolio by divesting some mature assets or low market share retail. And to concentrate our investments more in growth areas like the Africa retail or large emerging countries. We have expanded in Mexico, Egypt, Pakistan. We are looking to Brazil, to India for the future. And we want also, of course, to develop some non-fuel revenues, Momar will come back on that this afternoon, and some alternate fuels. So the target, which is to deliver more than $2.5 billion per year by 2022 as a -- more than a reasonable way to be delivered by the M&S.

A word about the U.S. as we are here today in New York. U.S., finally, is, for us, a land of growth because, of course, it's fitting well with our strategy of an abundant low-cost gas resources. I would also say it's quite a lot of low-carbon electricity. We have a nice development of renewables here. And in fact, the U.S. are a land for us of growth in LNG. I spoke about Cameron and future developments through petrochemicals around our Port Arthur platform, and also in natural gas for transportation, and we have acquired this year some shares in a company called Clean Energy, which is the leader of natural gas for transportation, and it's very interesting to see how this business can be developed in this country. I should not forget, of course, the deepwater, on which we've built a position because we want to leverage our deepwater expertise. At the end of the day -- in fact, the U.S. by 2022 will be the #1 country in terms of capital employed in the portfolio of Total, more or less 8%, 9%, 10% -- 9% of the Total capital employed for the group. We have generation of $1.5 billion per year of cash flow and $1 billion per year being invested.

Last piece of the strategy, building a low carbon electricity business, I mentioned it already, I explained the reason why. What does it mean? That means that -- and I know that in 2016, we present to you a puzzle, which a puzzle view, in fact, was not the best way to express to you the strategy. Today, in fact, because we have been -- we have the opportunity to put this puzzle into right order with the last acquisition we've made of Direct Energie in France, I think we can develop in front of you, better explain what we want to do.

In fact, what we want to do, again, is a full integrated approach to build a production, trading and marketing business, producing low carbon electricity, whereas, I'd say, a large group of it will come to capture it. We have, today, in France and Belgium, around 4 million customers, residential and professionals. We have a target to increase that to 7 million customers, so we have a large nice base of customers. But we don't want only to market, we want also to provide and to produce electricity and the target being to be able to produce at least 1/3 of the sales either from natural gas, its logic continues of integrated value chain that we described. We acquired recently some CCGTs in France on the top of the one which were in the portfolio of Direct Energie, or natural gas or renewables. We have some -- so today, we have various subsidiaries. The idea is to combine all of that to clarify it, but again, when I say it will be sizable, just to give you a -- and to convert what we intend to produce in 20 -- by 2022, 2023, into barrels per day, this would represent something like 200,000 barrel per day equivalent of petrol or oil and gas.

So it will be a sizable business, and we have the chance -- why we'll be profitable is because we have the chance to build this portfolio from the white paper. On one side, we are acquiring assets, in particular, the CCGTs, which, in an environment which is quite favorable, and we paid 1/3 to 1/4 of the -- of what would be the new CapEx for our CCGT. And on the marketing side, we built that from a pure digital model. And Direct Energie, in fact, is managing 3 million customers with 300 staff only. So compared to what are the business model of other utilities, we can be efficient. So this is what we intend to develop and do cash flow. We expect by 2020, should be around $1 billion out -- like we said, out of these businesses.

So to come -- to try to sum up all the strategy we described to you into more figures, we described on this slide what will be the -- on the new scheme of the new segments, what will be the image of the company and the cash flow from the company. The E&P in this new configuration, that means without LNG assets, is -- will represent around 55% of the capital employed of the group. We will invest around $10 billion per year. ROACE at $60 per barrel, about 10% because the LNG assets are quite heavy and capital employed. So it's a fact that we eliminate them from this group or this segment is enhancing the profitability and will represent a production of 2.6 million barrel per day, growing at 3% per year. In fact, most of the growth of the production is linked also to LNG business. It's Ichthys, it's Yamal, it's all these activities. So we will find -- and again, the cash flow from operation, from E&P, I would say, interesting to see of the way grow and they will grow quickly -- sorry, I take my paper because I don't want to make any mistake. They will grow from $15 billion in this segment in -- by 2017 to something like $18 billion at $60 per barrel and around $20.5 billion, $21 billion with [the sensitivity], which was mentioned at $70 per barrel by 2020. So it's a big increase of cash flow from operation for this segment.

So second segment is the new iGRP segment. So combining LNG and gas, renewables and power. This will grow from around $2 billion of cash flow from operations to almost $4 billion, so it will double in 3 years its contribution to cash flow for operations. This represent -- this segment will represent 30% of capital employed. CapEx, around $3 billion. Profitability is lower, but this is a segment where we will invest heavily, so of course, this is linked. And again, it's the LNG more than the low carbon electricity businesses, which are putting a weight on the ROACE, but we can reach -- we have the ambition to reach at least 8%, even 9% should be possible. This segment will represent a production of -- gas production of around 0.5 million barrel oil per day equivalent, growing at 8% per year and 40 million tonne of LNG managed and, again, electricity production equivalent of 100,000 by 2020 to 200,000 barrel per day by 2022, 2023.

And the last part, of course, of the group, but not the least, I mean, it's -- which is very frugal in capital employed at 15%, but we invest $3 billion and the ROACE, above 20%, as Patrick told you, this year, 25% is the Downstream, Refining & Chemical businesses. We announced last year that we want to increase by $1.5 billion of cash flows from 2017 to 2022. We are on this road map. Of course, it depends on the way we -- the refining margin will -- could be volatile, but we are well on this road map, most of the petrochemical projects delivering additional cash flows post-2020.

So in order to conclude and to come back to how we will deliver the shareholder returns and -- that we put to framework on the table in February. Of course, first, and this is an important message that we -- I think we have -- what Patrick delivered today is that we are -- we will have an outstanding growth in next 3 years from 2018, 2020, which give us a very clear -- then we have a very clear visibility on the cash flows. So in cash flows, we have $22 billion last year at $54 per barrel. That will increase this year, that will increase by $7 billion between -- at $60 per barrel by 2020. We said $6 billion, by the way, last year, so it's an additional $1 billion that we add on it because of the M&A activity that we have done in the meantime. So it's plus $7 billion at $60 per barrel. And it's even, of course, more at $70, because we have an additional $3 billion, so it's something like $10 billion at $70 per barrel. And to -- there is no figure for 2019. So I will give you one just to calibrate it. At $70 per barrel, we should be around $29 billion next year of -- $29 billion, $29.5 billion -- $29 billion of cash flow for this year, for next year, by 2019 just to calibrate, enhance the increase of cash flow of the group.

We have a clear visibility because there, again, it's just start-ups, productions start-ups are -- Kaombo has started up and Ichthys is starting as well in condensate, first wave of condensates is coming. Egina is on time to be delivered by end of the year. We have a strong cash generation from all the acquisitions of Maersk Oil pricing assets and Abu Dhabi as well. And all that, by the way, will lead us to have a return on equity of around 12% with $60 per barrel. This year, we are above 10%, reaching probably 11%. So this, again, we will come forth. So we are able to grow, while maintaining a good enhancing profitability of the portfolio of the group.

In terms of -- so what do we do with all this cash flow? We put a framework on the -- we proposed a framework to our investors in February and we'll not change it. Today, it will be a surprise to you. But first, of course, we have capital investments, a priority of the group and this is important for the board. Patrick confirmed to you that for the next 3 years, $15 billion, $17 billion per year, we don't anticipate cost inflation during these next 3 years. And I would say that the volume of CapEx, which is behind this figure, is the right level to continue to develop the group and the ambition of the group.

Dividend, of course, is the second priority, and we have announced 10% increase over 3 years. We have no scrip dilution. We buy back all the shares since February. Balance sheet, then, the third priority, to deleverage the company, maintaining the gearing under 20% and we support the grade direct attached, great importance of the grade A of the group. And the share buyback is the last element of this cash flow allocation, is a way to share additional revenues with our investors. In February, we saved up to $5 billion because we were still at a -- the framework was at $60, we -- this time, I can confirm that the $5 billion will be bought back in the 2018, 2020. This program is put into action, we deliberate, and we have increased the interim dividend by 3.2% in 2018. So we are on the path of the 10%. The share buyback, we have -- we bought back, on the first half of the year, I think, $600 million. We intend to bought around $800 million, $900 million on the second half of the year because share -- carry the oil price is higher than $60 per barrel. So we'll realize $1.5 billion in 2018 on the top of the $2 billion of scrip shares buybacks that we have executed -- that we are executing.

And so this gave us some strong momentum. And in fact there, again, in terms of Total shareholder return, on since, I would say, 2014, on the 4-year period for this cycle, we are at the top of the -- of peers. We have a 20% Total shareholder return since 2014 that's despite some downturn. So again, a clear visibility of the cash flows, a clear framework of share return -- shareholder return policy and an execution as we do it in all the segments of our activities in order to deliver our best-in-class TSR.

So as a conclusion to this strategy and outlook presentation, I think there are 3 messages today, and I would say 3 key messages to our investors: First is, yes, Total has a good and strong track record of execution and we deliver our objectives, and for the next 3 years, we are -- you will -- our investors will benefit of an outstanding production growth; of a CapEx discipline, which -- on which we are fully committed; and on a downstream, which is one of the best-in-class downstream, which is consistently delivering $7 billion per year or even a little more.

The second message is that this give us a very strong confidence and a very strong visibility on the cash flow growth to 2020. I mentioned $7 billion of additional cash flow between $60 per barrel, $10 billion at $70, and $80 is even more than that. I don't want to give you bad ideas, but there are there a clear road map for shareholder returns on which we are committed. And the last message is that beyond 2020, we have in our hand a very attractive portfolio; on the short-term opportunities, I've seen that we are able to deliver $2 billion -- or $1.5 billion additive value just because to mobilize 400 million barrels of short-term opportunities. We have a nice portfolio of -- attractive portfolio of large projects to be sanctioned by 2020.

We have established a very strong position in the LNG business, which is one of the booming business in our industry and at the right time. And we also think that we can build an attractive low-carbon electricity business in the coming years. With that being said, I hope that, again, commitment is consistently deliver added value for the benefit of shareholders.

Thank you for your attention.

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Questions and Answers
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Mike Sangster, Total S.A. - Senior Vice-President of IR [1]
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Okay. So we'll move to the Q&A now. We have a few Q&A sessions throughout the day, one this morning and 3 sessions this afternoon. So please be patient with me, but I know you have lots of questions to ask. I'll try my best to get through everyone. Please give your name before you ask a question, and try and keep it to one question. I know I'm pushing it when I say that, but try your best. Okay. Let's start with Jon Rigby.

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Jonathon Rigby, UBS Investment Bank, Research Division - MD, Head of Oil Research and Lead Analyst [2]
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It's Jon Rigby from UBS. I was going to ask 2, but I can do 1, for good order. The thing that seems missing in this is, because it's a strategy event, is the sort of back end of the cash flow. Because if my basic arithmetic is correct, you look like you'll be generating something like about $10 billion of excess cash flow at $80 a barrel, and probably $7 billion or $8 billion, maybe $7 billion at $70 a barrel. But you haven't updated on your buyback. You've made, I think, adjustments, subtle adjustment on your intention for debt. And while I think -- I don't see you commit to a target, can you provide some strategic thinking around the disposition of excess capital at the higher point in the cycle so we have some kind of idea about what your intention would be if oil price will stay at these current levels? That's it.

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Patrick PouyannÃ©, Total S.A. - Chairman, CEO & President [3]
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Okay. I think, first, maybe we are prudent. But the price of oil is, to date, $80, I don't know where it will be 1 year. So we have -- we don't want to modify the framework we gave to our shareholders only few months ago, on which we are committed. And by the way, I know that when we announced in February, I -- when I discussed with some shareholders that we announced 3 years in advance an increase of dividend, some people told us that we are quite bold to do that. Having said that, what we will do if we have more cash because if supply is established more durably at a high level like $80. I think we have, for me, it's quite clear. First, continuing to deliver as a company is a priority, because if you have a high price, you will see one day we have the low cycle coming back. So I would say part of the cash will be allocated to a low-generator company. And we set the target under 20%, we are today at 15%, I think, or 16%. We're not going down. I'll remind you that some of our peers 3 years ago were even at 0% of gearing. So that's one of priority. The second part will be, of course, this is the why we introduced share buyback concept in the February framework. But obviously, if we have more cash, we'll share part of it with our shareholders for some increasing share buybacks. I don't want to give you today any figures, but it's the second allocation of -- it's the logic of it. The logic of it is to use the share buybacks rather than the dividend because the dividend we want -- I remind you, that we have a constant policy of never cutting it back, but to use a share buyback as a way to return value to the shareholders. And the third part, what I can say is that as I mentioned during my speech, in terms of capital investment, I consider that volume. What we're investing is fine and is enough to be able to help, to allow us to grow the company because we have also to manage the portfolio, and we have some ideas to sell some assets. And but, of course, if the price, in your scenario, Jon, if the price remain at $80 per barrel, one way or the other, we'll see some inflation in the cost. So the volume should remain the same. The value could be -- could have some impacts, that would be the market. But I don't consider which will happen before 2020. So let's -- but again, if we are really in a scenario where high price only 3, 4 years, your question is the right question, but we'll have -- we could have -- we have to update or say the [group] strategy. But again, you have the fundamentals, lowering the gearing, share buyback increase. And in terms of CapEx, the volume should be the same, facing maybe some inflation. I told you one day that I don't anticipate, that I don't think that would -- going beyond $20 billion would be a very good idea for the fundamentals of the group.

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Mike Sangster, Total S.A. - Senior Vice-President of IR [4]
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Okay. There's a couple more questions at this side, then we can move to the other side. So it'll be Theepan Jothilingam then Oswald Clint.

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Theepan Jothilingam, Exane BNP Paribas, Research Division - Head of Oil & Gas Research and Analyst of Oil & Gas [5]
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It's Theepan Jothilingam from Exane BNP. I had a question actually on the comment you made around an attractive portfolio in hand, the 700,000 barrels per day. So could you take a little bit about what the breakevens are, what the IRRs that are expected? And in the same vein, is the message really beyond 2022, to grow at the same rate in terms of volumes going forward to, let's say, the middle of the decade? Is that the strategic intention here, that Total remains a growth stock?

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Patrick PouyannÃ©, Total S.A. - Chairman, CEO & President [6]
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Again, because Patrick had mentioned to you that the 6.7%, combined with the 5% for 2022 imply 3%, 4% from post-2020. I think being able to grow around above 23% should be feasible. The answer to this question is not so easy today because we don't have it on hand today or the portfolio we'll have in 2023 or 2025. So when we made some long-term plan exercise in the group, we are developing all the assets we know, but we have -- we know that things will move, we'll not be asleep during 5 years. So we can -- we will have access to new resources there in some places around the world. But I would say that it's possible that we can grow at this level. Again, we have demonstrated, I think, the last 3, 4 years that, and I strongly believe that, it's better to be reasonable if the price are high, but to take benefit when the price are low of some opportunities like we've done in the last years. In terms of IRR, it'll be clearly attractive, I don't know, it was not written. But we have -- we continue to sanction the projects at $50 per barrel, and we target IRR around 15%. And I think in February, you had the split by IRRs about the portfolio. We don't show it there, but this could be described to you. There is no change of strategy, no change of policy. I think the only way to maintain a low breakeven or what is consistent, if suddenly you decide to change the way you sanction the project by using $60 per barrel then, of course, your breakeven will go up. So I don't -- we don't want -- we have enough resources in the portfolio to be able to be at where this type of objectives when we sanction projects.

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Oswald C. Clint, Sanford C. Bernstein & Co., LLC., Research Division - Senior Research Analyst [7]
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Oswald Clint here from Bernstein. Could I ask about your LNG slides? Your LNG outlook, it's constructive, it's supportive of a good market. You're investing heavily in this market. You also mentioned a 60 million tonne or 56 million tonnes of Russian expansion coming from Novatek. That's quite a big number. And if we add it all together to the other regions, again, maybe 5 years down the line, we have another supply wave of LNG coming through. Is that something you think about, and another risk on the supply side? Or like this particular cycle demand comes through, still growing potentially more stronger, and there isn't this sudden period, 5 years down the line, when everyone's talking about weak LNG demand, just as you're investing heavily in it once again. And perhaps just linked to that, maybe just expand on your strategic initiatives to penetrate China a little bit more with your LNG portfolio. From our vantage point, it feels very much Africa, and perhaps, South America, even countries like Cuba more recently. But I'm curious to know how Total can push deeper with LNG into China.

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Patrick PouyannÃ©, Total S.A. - Chairman, CEO & President [8]
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Of course, as I said, I think the demand for LNG is mainly driven by Asia and by China, in particular, policy. There is a -- but there is today the strong statement by Chinese government that they want to really increase the share of the gas in their energy mix from -- multiply it by 2 or more than 2 from 6% to 15%. So this gave a strong momentum to LNG demand. I think they are very serious about it because mainly of air quality and other issues, which are very important for them and for the global stability of their society. So this is one of the main driver but we observe that also in Korea, which is shifting also more and more to energy. So with an assumption of 5% per year, if you take, by the way, the last 3, 4 years, it's even a lower assumption, okay. We have been -- we moderated it in the future, but I think it's not being over-optimistic. When we say that, the question is where this LNG will come from. And that's true, but Novatek target is very ambitious but, in fact, it's just the idea that beyond the amount, which represents 16 million tonne per year, you will have another project called Arctic 2 of 20 million tonnes and another one by 2025 and another one by 2030 of 20 million tonnes. So in fact, it's 3 projects. The resource base is incredible there, you have -- it's not a question of size of resources, it's more a question of being able to execute the projects. But one of the -- whole interest of this position in Yamal Peninsula is the fact that the Russians are investing in opening permanently the North Sea Route, the north route to Japan and to China. In fact, the Russian government have decided to invest in some nuclear icebreaker in order to have to open it, to open this route permanently. If it is the case, that means that Yamal is one -- is the best, is very -- it's only 15 days, I think, from China and Japan. And even if we have to transship the LNG in Kharyaga all that is superefficient. And by the way, this is in terms of potential of adding value to Yamal, the Yamal investments that, today, the ships are going around the world for transshipments in Northwest Europe. Once we will have managed to optimize of the logistics, which will add the value of Yamal on the Arctic to -- and the future project. So yes, it's -- we have, Novatek and Total, we have opened there a real profitable province for LNG, with a huge potential. And so then it's a question of managing the projects, which is not so easy in this type of environment. But I think, really, I strongly believe that the Chinese policy is a strong supporter to the expansion of the LNG market for 10, 15 years to come.

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Mike Sangster, Total S.A. - Senior Vice-President of IR [9]
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Okay. There's a couple of questions there on the side, maybe, Jason, then Irene.

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Jason Gammel, Jefferies LLC, Research Division - Equity Analyst [10]
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It's Jason Gammel with Jefferies. Obviously, on the acquisition side, there's a lot of transformative deals that you've done over the last 4 years, and had been highly successful in acquiring assets. Now that we've seen a big move in the oil price to the upside, are you starting to see the market developing into more of the seller's market. And I'm not expecting any change to the guidance of $2 billion net per year on A/D, but would you expect that you're going to be more active on the divestiture side of the business if prices remain where they're at today?

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Patrick PouyannÃ©, Total S.A. - Chairman, CEO & President [11]
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That is the logic, I have to be consistent. I say that we have to be countercyclical. So it's true that Patrick told you that we managed to sell $10 billion of assets in the last 3 years, but it was not a lot of upstream assets because it was difficult to sell them. Today, it's most of the case. Today, it's fairly more seller assets. So we -- yes, that's true that we have identified, during these periods, in our portfolio some assets, which were not very resilient to a low price, and it's time to try to market them. So we put some mature asset, not only mature assets, by the way, it's not true. A bunch of portfolio assets in U.K., North Sea that we have acquired from Maersk Oil, to try to clean the portfolio, to be more efficient. But we have other ideas in our mind of assets to -- this year. So you -- again, I'm not -- we are not driven by volumes even if we have to show you what we have growing. We are more driven by value creation. And there are some barrels in the portfolio of Total, which represents a volume which are not really generating a lot of cash flows even at $70 per barrel. So these ones are for sale. So yes, you could see Total active on this side as well in the coming years if the price remains at this level.

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Mike Sangster, Total S.A. - Senior Vice-President of IR [12]
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Okay. Then maybe Irene, then Thomas have questions.

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Irene Himona, Societe Generale Cross Asset Research - Equity Analyst [13]
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Irene Himona, SociÃ©tÃ© GÃ©nÃ©rale. By 2040, you aspire for low cost -- sorry, low-carbon electricity to be 15% to 20% over your sales. And why 20%? What proportion of assets or CapEx will that represent? How quickly do you aspire to get there? Does it remain Eurocentric? What sort of returns compared to traditional oil and gas?

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Patrick PouyannÃ©, Total S.A. - Chairman, CEO & President [14]
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Again, it's a scenario which is consistent with the idea that we'll reduce our carbon intensity by 25% by 2040, just to give you some -- there are various scenarios which have been elaborated by the teams. Yes, the idea is mainly to develop that in Europe, let's be clear, it's a European strategy. We'll -- behind -- in fact, if we were behind it and I cannot describe all the figures, but it's achievable by not so many, of course, it will require some of our acquisition of the segments if we want to do that, but we have time. No, it's between 20 -- we are in 2018, we speak about 2040. So we have time to do that. We want, first, to demonstrate and to comfort the profitability of -- well, we're just down in France and Belgium. We think, clearly, that we can, organically, in these 2 markets, reach 15% of market share. Direct Energie is acquiring 500,000 new customers per year. Total Spring was -- is just acquiring around 300,000. So it's a combination of both, even being more efficient because we are able to synergize the back office, et cetera, will give us a good momentum. This, again, this activity, we are targeting on this one more than 10% of profitability of capital employed. And in this type of scenario, where I don't know if it will happen, but if by 2040, really, demand for oil is stagnating, but maybe but the price of oil should not be very high. And I remind you that at $50, $60 per barrel, portfolio company like Total is gaining a return of 8%, 9%. So it's a question of combining different assets. So how much do we invest, we plan to invest in this business around, it was written, I think, around $1.5 billion per year, $1.5 billion to $2 billion per year. And with this pace of investments, we can reach the target that we mentioned to you of 15%, 20%. So but again, we know it's a diversification. We have made a big step by acquiring Direct Energie because it gave us the size, so we can look more, I would say, clearly to the way, to the level, to the leverage to -- or we can leverage the profitability of this business, but we have confidence in the figures we deliver to you

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Thomas Yoichi Adolff, CrÃ©dit Suisse AG, Research Division - Head of European Oil & Gas Equity Research and Director [15]
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Thomas from CrÃ©dit Suisse, over here. Last quarter, I asked you a question and you didn't want to answer it. And you said you'll answer it today. So I'm going to try it again. Integration and scale has its benefits, but also being small and nimble can have its advantages. Total is now a very big company, and you're growing fast but you're growing in a fairly concentrated manner in key hubs. You're integrated, but not as integrated as you'd like to be. And in more recent year, you've added more OECD barrel. So in essence, the question is, how would you define the sweet spot of risk and value? That was the question last quarter. And then quickly, a second question just on LNG, if I may. You've highlighted 4 projects and possibly a fifth one, Tellurian. Now everyone wants to develop projects, LNG projects at the time. Now if we're all going at the same time, isn't that a recipe for disaster, just like last cycle? So what are we going to do differently this time?

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Patrick PouyannÃ©, Total S.A. - Chairman, CEO & President [16]
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First, in terms of LNG projects, I think one of the -- I mean, if we look to what we propose to develop, there are mainly, except Arctic 2, some projects, which are, in fact, building -- expanding existing projects other than greenfield projects, which puts us in a good position in terms of, I would say, cost of delivering the LNG compared to some of the -- some competition. So I think it's -- the interest of the portfolio we have is that we can expand some of the energy platforms, which we have in the portfolio, in, I would say, in an efficient way. I still do not understand fully your first question because you start off big against small, and then you -- I'm not sure to have captured what you want with this.

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Thomas Yoichi Adolff, CrÃ©dit Suisse AG, Research Division - Head of European Oil & Gas Equity Research and Director [17]
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(inaudible).

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Patrick PouyannÃ©, Total S.A. - Chairman, CEO & President [18]
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Yes. But I think we try to describe for this presentation, but we have some focused areas, one of them being LNG clearly. And we strongly believe that there's the combination of our capacities in the upstream part, but also in trading and marketing under Laurent leadership is strong and that we can -- this market is being more and more commoditized. Laurent will come back on that this afternoon, but we can wait. So we have one big sweet spot in which we think that we have built years-after-years position, this is one. We spoke to you about Deepwater, it's another part. So I think we identified through the presentation the key areas of confidence on which we want to invest for the future of growing the company. Maybe it wasn't clear enough, but we tried to give you some answer to your questions. What are the risks? The risks are of many natures, in particular, the market trends. We are in an evolving energy market, with many trends. It's not -- everything is not clear. We try to put ourselves on, I would say, the safe -- on one side, we're trying to put ourselves on the safe side, in particular, on the oil business, but we continue to grow our oil activity. But we want to be safe in terms of positioning the portfolio. And on the same time, we can be bold by trying to prepare the future of the company, to build the future of the company by positioning ourselves as well on this low carbon electricity business. So these are -- but these are the risks that you can take. So it's a question of what is -- to come back on your question, what is the right combination between the various businesses that you put in your portfolio? There is no magic number, but it's more a question of opportunities and to permanently monitor the strategy according to the evolution of the markets.

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Mike Sangster, Total S.A. - Senior Vice-President of IR [19]
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Okay. Maybe come back over here. And I thank you all for your patience. Maybe we can go to Lydia, then Chris.

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Lydia Rose Emma Rainforth, Barclays Bank PLC, Research Division - Director & Equity Analyst [20]
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Patrick, one question. Just around the delivery and the focus on what you've delivered in the last 3 years, which has been impressive, is there anything that has disappointed you over that period? And also then looking forward, the idea of where do you see the most upside in terms of the delivery? Is it on the digitization? Is it on the LNG side? Just where you think the results of the upside, from outside.

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Patrick PouyannÃ©, Total S.A. - Chairman, CEO & President [21]
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Patrick?

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Patrick de La ChevardiÃ¨re, Total S.A. - CFO [22]
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I'm not disappointed by nature. I'm quite an optimistic guy. I think that among our project, and everybody knows there is one project which was not perfect, which is Ichthys. There is some disappointment there. On the other side, you have plenty of beautiful project developed in time and within or below budget, which balance dramatically in favor of Total, our view on the project. In terms of what is the most exciting things for the future, I think -- let me ask first the question raised asked by Adolff, what we made differently, which is part of your answer also. What we made differently this time in this cycle. First, we deliberately act counter-cyclically. Second, while we were growing the company, we are working to simplify our process. And you should not minimize the time of the management in our willingness to simplify our processes. So One Total means something in the company. So Marie-NoÃ«lle will explain you, give you a few example of what new technology can bring to our organization and our future. I'm quite enthusiastic by that, even if we are in a navy industry. I mean, you will see some example of things that are astonishing, I would say. You want to add something, Patrick?

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Patrick PouyannÃ©, Total S.A. - Chairman, CEO & President [23]
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No. I think, again, yes it's true that we had some hiccups in the project execution to be honest. But in fact, even if they were delayed, it's better to start a project when the price is $75 and $50. That's a reality. So in fact, we were nervous about having that late because we were looking to lack of cash flows and we were counting all the cash. But in fact, it's better to start Kaombo at $75, $80 rather than $50 I can tell you. And it helps a lot. So even this part, which honestly was -- and it was disappointing because it was, for me, a very strong area of excellence. At the same time, Yamal LNG, it was the most impossible projects which was launched in the industry and this is the only one which is under budget and even -- which -- in advance compared to the timing, I think the first train of Yamal LNG will even start before the end of this year, probably, compared to what we had in mind. So we have -- it's a mixed feeling. Then, of course, as you know, that there was some good news that we have announced, building up our capacity to under renewable exploration strategy taking time, but I'm not disappointed. I'm more patient on that, and I'm happy to see that we have good results, which can deliver some value. So no, frankly, there is no disappointment. I mean, I'm even more and more surprised, quarter-after-quarter, by the capacity of the company to deliver. And so it gives us a strong confidence as the CEO of the company, and we spend a lot of time to -- on the short-term issues. And now we are able to speak to you more on the long term, which is -- makes -- translate this confidence. And the confidence is shared by the Board of Director. And I think this, of course, give, I would say -- it's a virtuous cycle, a good momentum inside the company as well. And one of the thing, which is not realized, but today, in fact, this discipline even sometimes we face a situation, where people in the company are really -- this culture of discipline in terms of management is deeply rooted in the company, that's one of the success. And so that's the point. But of course, at the same time, we have been bold in some part of the M&A activities. Again, we, in LNG, we have made a big step forward by buying this portfolio. And so we have a huge responsibility today to deliver value, and I think there is a lot of value there, that is strong move. We are bold also by entering into a big way, being the first oil and gas company to enter into this low-carbon electricity business in a big way. I'm sure we'll be followed by others there. It's the route. I think, for me, it's simple, Board of the Director will be clear and I should have answered that also to Irene. It's a way to give, to describe what could be the future of an oil and gas company. We know that investors, not the specialist ones, but some investors, when I met some general investor, they put money in Apple or Facebook, I don't know why, and all the digital technology. They see oil and gas segment, sector as something maybe of the past because when you open newspapers, you see some articles about we need more -- we will not need oil in 2030, which is fully wrong. We all know that in the industry. But I think this is also, for me, a way to -- there is a bright future for these companies because we will be able to use all our engineering capacities, our management capacities, our financial capacities to build a new energy model for energy company, and this is the ambition we have.

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Mike Sangster, Total S.A. - Senior Vice-President of IR [24]
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Okay. We'll go to Chris and then to Henry.

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Christopher Kuplent, BofA Merrill Lynch, Research Division - Head of European Energy Equity Research [25]
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Chris Kuplent from Bank of America Merrill Lynch. In the very same vein, Patrick, you started your presentation today by saying you wouldn't expect an update of the strategy every year. Indeed, we don't. And you've stuck to your 2020 time frame. So essentially I'm asking a question around capital allocation beyond 2020. I suppose some of your peers have already chosen to give us a little more visibility of where they expect to be in the mid-'20s. I wonder whether you -- when you look at your $10 billion annual CapEx budget for E&P, relative to the 3 and 3 for downstream and integrated gas, renewables and power, how you envisage that to change into, let's say, 2025 and beyond? And I suppose a little mini-question attached to that is if you're already spending now $1 billion to $2 billion on renewables and power, you've only got left $1 billion and $2 billion to spend on Nigeria LNG, Arctic 2 and lots of other potential LNG projects. Should we assume that you'll continue to use project finance also on top of that $3 billion in this division to expand further?

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Patrick PouyannÃ©, Total S.A. - Chairman, CEO & President [26]
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The answer is yes. Yes, we use project finance. It's a -- we consider it's a good way to leverage our equity in these businesses, no problem with that. If you want my feeling, but again, to explain 10 years in advance would be [done, not so]. I think you could see probably CapEx allocation to this -- our GRP segment growing, should be logic with what I described, betting more on natural gas. And so expanding these ones, so the $3 billion could become $4 billion, let's say. I don't think it will go up to huge amount. We don't -- again because part of it is being linked to the project financing that you just mentioned, so it's a -- there is a link. We could probably one day to update you of -- if we could -- we look at it, by the way, in terms of how do we allocate capital, especially in terms of proportional vision, which means what is our real -- it shifted a little, it's adding $1 billion on this segment, in fact, but not much more. So this is probably things we could do. I don't think refining chemicals, petrochemicals and marketing should change a lot, neither going down or going very high because we need $3 billion to maintain this activity. I mean, there's a lot of industrial maintenance. Again, it's more a question of being able to find the opportunities to invest, but these also is project finance, generally. So it doesn't capture it, most of it. And then upstream, the $10 billion, again, is linked to what could be the oil price environment. But if we want to grow by 3% you can demonstrate from a base of 3.2 million, 3.3 million barrel of oil per day, you find 10 billion, 11 billion of it. So we saw more or less the way it could be disturb -- distorted.

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Mike Sangster, Total S.A. - Senior Vice-President of IR [27]
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Okay. Can we...

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Patrick PouyannÃ©, Total S.A. - Chairman, CEO & President [28]
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And I think if today we gave you last year some figures 2022, you have some figures in this presentation as well. And my colleagues will come back this afternoon on figures, which give you some [minutes]. But it's because we wanted just to highlight to our investors that we will benefit, in Total, people who are buying shares today, for the next 3 years over here, our outstanding growth. And we're really translating in additional cash flows and return to shareholders, I think it was also, I would say, the part 3 of this presentation today to highlight what will happen, what we'll deliver. And based on the track record delivery, this was, I think, the main axis of the presentation.

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Henry Michael Tarr, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [29]
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It's Henry Tarr from Berenberg. Just a quick question on the short-cycle developments that you highlight. How flexible are investments here? So with the current oil price, are you pulling forward some infield drilling in some of the projects, et cetera? Or are all of these ones that you would have pushed ahead with anyway in a $50 to $60 environment?

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Patrick PouyannÃ©, Total S.A. - Chairman, CEO & President [30]
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Arnaud will come back on this afternoon. But the idea, the instruction given to team is to be flexible. It's a question of what type of drilling rig contracts you sign, in fact. So it's to be able to mobilize it, to demobilize the rigs. And from this perspective, the fact that as we show you the markets, the Deepwater rigs market is favorable, you have today end-use capacity around 30%, 40%, gives us, of course, some capacity to adapt this contractual framework. So this flexibility is required to be able to qualify this type of infields or tiebacks of short-term cycle investments.

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Mike Sangster, Total S.A. - Senior Vice-President of IR [31]
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Maybe one more question from this side, from Blake.

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Blake Michael Fernandez, Piper Jaffray Companies, Research Division - Senior Research Analyst [32]
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It's Blake Fernandez with Piper Jaffray, Simmons. I realize we're late in the hour, so I'll just ask a quick question on decline rate. I know you said it's down to about 3%. And part of that was underpinned by long-cycle projects. But I presume some of that is also short-cycle infill drilling, which is probably shorter term in nature. So can you give us a sense of what you think the medium-term decline rate is and when we might start to see that?

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Patrick PouyannÃ©, Total S.A. - Chairman, CEO & President [33]
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Well, the 3% is...

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Patrick de La ChevardiÃ¨re, Total S.A. - CFO [34]
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The 3% is very simple to explain. 50% of our production has no decline. So that's 0 decline. The other 50%, which are more shorter plateau dip like in Nigeria, in Angola, in Congo, leaving aside GLNG project, of course, has a 6% decline rate, which is in line with what you can find on the industry between 6% and 7% in general. So nothing special. And the infield drilling, yes, they may have some higher decline rate, but this is part of the 6% I told you.

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Patrick PouyannÃ©, Total S.A. - Chairman, CEO & President [35]
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Yes, and the short cycle I mentioned to you, what we are [mobilizing, which will represent] 100,000 barrels per day, in fact it's helping to lower the decline rates of the base of production. Because by doing this work and we will -- so the 3%, honestly, it's not 3% to 4%. It's 3% and for quite a lot of years, many years, in fact, we can consider it.

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Mike Sangster, Total S.A. - Senior Vice-President of IR [36]
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Okay. There was a question in the back, on the left. Christyan?

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Christyan Fawzi Malek, JP Morgan Chase & Co, Research Division - MD and Head of the EMEA Oil & Gas Equity Research [37]
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This is Christyan Malek from JPMorgan. First question, when you look at the ambitions to reduce your carbon footprint through lower -- low carbon electricity as well as gas, et cetera, into the next decade, do you think your CapEx guidance has been appropriately recalibrated to stay within that $15 billion to $17 billion beyond 2020? Just trying to triangulate how you keep spending to grow your bread and butter business, assuming growth remains the priority as well as transition yourselves mix -- towards low carbon while staying disciplined within the CapEx? Secondly, coming back to shareholder return, with your gearing now well below your targeted standard 20%, and strong cash generation over in the next years, what is stopping you from committing to more aggressive shareholder returns that actually runs concurrently with lower debt? I mean, pivoting around debt reduction when you already have a healthy pipeline of projects to sanctions suggest that you're prioritizing excess cash for acquisitions to keep gearing as opposed to returning it.

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Patrick de La ChevardiÃ¨re, Total S.A. - CFO [38]
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Okay, Christyan, basically, the $15 billion, $17 billion CapEx, if we are facing no inflation, that what -- we are not facing any inflation today in our business, meaning deep offshore and LNG. This is valid post-2020. If there is inflation coming by 2021, 2022 because the oil price is at $100, then we will see. As Patrick told you, we commit in volume -- the volume of works we want to do. And there our current pricing, it is $15 billion to $17 billion. Another question of the gearing, on the gearing, we can be as low as single digit if we go in high turn of the cycle. And I used to say that in 1 and 1, while entering in the past downturn when we add a 30% gearing, that was not comfortable. So we deliberately want to lower our gearing when we are in the high range of the cycle and single digit, why not?

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Patrick PouyannÃ©, Total S.A. - Chairman, CEO & President [39]
------------------------------
I remember the first half of '16, there was very little capacity to move and there was plenty of opportunities to market, we would have add a gearing of less than 10% beginning of '16. I can tell you we'd have been much more active and we could have taken other opportunities. So I think, again, this is driven by this fundamental belief that cycles will come, maybe we are entering a new high cycle, but downside will come back. And I would have loved to have entered into 12 and 16, 5% or 10% gearing, would have been more active in some areas, but we have been -- we were unable to do that by that time. We were focused on strengthen the balance sheet. And then we've done it in '17 because we were done the work. So I think this is a lesson first. Why not committing to a buy back? I answered the question. Because that's, again, we were at $42 per barrel one year ago, we are today at $75 or $80. And I don't know where we'll be in one year, I'm not so optimistic by end of late '19 if the U.S. shale oil is coming back into the market. You could see this world has plenty of surprise, so first. Second but what I said, and I answered clearly, we introduced this buyback in order to share with our shareholders part of the additional revenues. So we will do it, this was my answer to -- as a second priority to Jon. To give you today a figure, 6 months after, we put the framework on the table with -- it would be for me, not so, I don't want to modify the figure every year. What I want to do, by the way, where, again, I know some of my peers announced some buybacks. We announced one but we execute it. Not all of them have executed it. So maybe it's less ambitious, maybe we are prudent but we are delivering what we say. And of course, again, I'm committed to do that. I can see that in a commodity business compared to a $50, as soon as we announced to you that we manage the company at $50, $60, it's logic. But if we have $80, we have additional revenues, part of it should come back -- should go back to the shareholders, either for increase of dividend or buyback. To give you figures, it's premature today. But I would be happy to come back on this topic in the near future. But it means -- but the price remain at the high side.

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Mike Sangster, Total S.A. - Senior Vice-President of IR [40]
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Any more questions before lunch? There's one here from Lucas.

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Lucas Herrmann, Deutsche Bank AG, Research Division - Head of European Oil and Gas [41]
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Patrick, sorry, it's staying with buyback, but it's asked in a different vein. As this industry moves to a different -- or as the oil and gas industry moves to a different stage in the cycle, volatility increases, future growth becomes more or less certain. What point do you start to think of this organization as a per share company rather than absolute? And it's really directed at dividend. So the question is when do you start thinking more per share rather than absolute?

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Patrick de La ChevardiÃ¨re, Total S.A. - CFO [42]
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Okay. Obviously, I can't be happy.

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Lucas Herrmann, Deutsche Bank AG, Research Division - Head of European Oil and Gas [43]
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You're always happy.

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Patrick de La ChevardiÃ¨re, Total S.A. - CFO [44]
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We're worth much more than that. And you know that we are working towards pleasing our shareholders so that we can attract new one and increase the share price. That's basically what we are doing.

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Lucas Herrmann, Deutsche Bank AG, Research Division - Head of European Oil and Gas [45]
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Sorry, that's not what I meant, Patrick. What I meant was that the pull on cash flow from dividend is substantial. At what point do you think more about yourselves as a company that looks to grow per share rather than grow absolute in the context of...

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Patrick de La ChevardiÃ¨re, Total S.A. - CFO [46]
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No, we basically gave a target of a 50% payout towards the shareholders, that's basically what we have. So we have the dividend. And on top of that, we can play with the share buyback to achieve it.

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Mike Sangster, Total S.A. - Senior Vice-President of IR [47]
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Maybe time for one last question before we break for lunch, Martijn?

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Martijn Rats, Morgan Stanley, Research Division - MD and Head of Oil Research [48]
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Martijn Rats from Morgan Stanley. I was just wondering if you can talk a bit about fiscal terms. Of course, you've done a lot about your own cost as one of the main components of IRRs of deepwater energy projects is what the government allows you to make. And now that basically we've had this big oil price downturn and looks like we've sort of started an upturn, any movements in fiscal terms that you're seeing?

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Patrick PouyannÃ©, Total S.A. - Chairman, CEO & President [49]
------------------------------
No, no. Nothing. Nothing. I mean, again, I think it's premature. I mean, the whole ecosystem is still prudent today, and I think it's too early. But no, no, I don't see that. And in fact, no. There is, honestly, no discussion on which could be detrimental to us. I think we have been able, in some few cases, to enhance the fiscal terms in order to launch some marginal phase like in Angola, and we have been -- which have been confirmed by the new President. So I think it's still, you have many of these producing countries, which are willing to see more activities, which are -- so farther lot, in fact, from the downturn. And so they are still offering some possibilities to enhance the term. So I don't -- we didn't see any of that. No, it'd be clear. Nothing, nothing.

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Mike Sangster, Total S.A. - Senior Vice-President of IR [50]
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Okay. Maybe if that's the end of the questions, maybe we could break for lunch now. If you'd like to join us for lunch, we just have to go up the stairs to the 7th floor and we have a buffet lunch available there. I'm planning to be back in the room at 1:30 to start the focus sessions.

(Break)

==============================
Presentation
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Mike Sangster, Total S.A. - Senior Vice-President of IR [1]
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So as Patrick said this morning, so the afternoon, we have a series of focus sessions on different parts of the business and the plan is to run them 2 presentations at a time, back-to-back, then followed by a Q&A for 1 hour for each of the 3 sessions. So the first one this afternoon is where Arnaud Breuillac, who's the President of Exploration and Production on Deepwater, which is a profitable source of growth, and then followed by Laurent Vivier, who's the Senior Vice President of Gas, which is growing in the integrated LNG value chain.

So pass it over to Arnaud and Laurent.

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Arnaud Breuillac, Total S.A. - President of Exploration & Production [2]
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Okay. Good afternoon. It's always challenge to be the first speaker after lunch. However, I hope that my presentation, and maybe even more, my French accent will keep you awake. My presentation will focus on our Deepwater operations and assets, which will contribute significantly to the profitable growth of Total E&P business in the next 3 years.

Here, you see a picture of Kaombo Norte, which is our latest FPSO in deep offshore Angola, which started at the end of July of this year with a capacity of 115,000 barrel per day. And this is actually our 10th operated FPSO in the world.

So Deepwater is one of the strengths of Total, and we are leveraging this expertise to add profitable and cash-accretive resources to our portfolio. Our production will increase to more than 0.5 million barrel of oil per day by 2020 with cash flow from operation over $30 per barrel at $60 per barrel. Deepwater is approximately 15% of the group production that will contribute to more than 35% of the cash flow from operations in the coming years. And like for the rest of our production, we have very low OpEx, amongst the lowest in Deepwater.

By 2020, we'll have 3 main zones of production: Africa, Brazil and the U.S. GoM. Africa, this is where we developed our expertise, pioneering developments in Angola. And then we have developed successfully giant projects in Angola, in Nigeria and in Congo. This year, in addition to Kaombo Norte, we will start production on Egina FPSO in Nigeria on the same block as our Akpo-operated FPSO. We have 2 axis of development: short-cycle infill opportunities, usually tieback to existing infrastructures and larger-sized projects like Owowo in Nigeria. In Africa, we will produce 400,000 barrels per day in the coming 5 years.

Second, in Brazil. We are growing our portfolio with already producing assets like our operated Lapa FPSO, our Libra and Iara's early production facilities. It should be noted that we are the first IOC to operate the field in the prolific Brazilian pre-salt polygon, and this is with Lapa. On Libra, the first FPSO renamed Mero 1 has already been sanctioned, together with 2 FPSOs on the Iara giant block. And we have a new wave of projects coming up for sanction. Our Brazilian production is expected to exceed 100,000 barrel per day by 2022 and continue to grow afterwards.

Finally, in the U.S. GoM, we already have a solid cash generation from our assets of Tahiti and Jack, and we are preparing the next wave of deepwater projects following our discoveries on Ballymore and North Platte and our acquisition of Anchor, with a target to reach 100,000 barrel per day. In addition, you will see that we have a high-potential exploration portfolio.

The cash generation from deepwater start-ups will be growing significantly in the next 3 years, and this is reported by 3 already started projects or in very advanced stage of completion. You have Moho Nord in Congo, Kaombo Norte in Angola and Egina in Nigeria. Egina FPSO is already on location and has been anchored successfully and is now in commissioning, preparing for start-up before the end of the year. And Kaombo Sul is in the final phase of construction and should start up mid-2019.

The cash flow from operation at $60 from those 3 projects will grow from $1 billion to $4 billion by 2020. And these FPSOs will represent 200,000 barrel per day or 7% from our production, but equivalent to 20% of our cash flow from operation -- from our cash flow from operation. And with this additional production, Total will consolidate its position of #1 in Africa. Indeed, our deepwater expertise was developed in Africa where we obtained several industry awards from the OTC for world first. I could mention the first hybrid riser tower on Girassol, the integration of gas lift and heating systems in production risers on Dalia. Akpo was the first all-electrical FPSO. And on Pazflor, we installed deepwater subsea gas-liquid separation. We now operate 10 FPSOs, more than 600 deepwater wells, and we deliver a very robust 95% operational efficiency, thanks to operational excellence and continuous improvement of maintenance and logistics.

We have also reduced development costs. For example, the number of days required to drill and complete a deepwater well in West Africa has been reduced by 35% from 2015 to '17, thanks to optimized, standardized -- and standardized well design, removing some casings by lower nonproductive time. This is all of the preparation of the drilling campaign and the training of the crews and also by the use of digital with a remote monitoring 24/7 from our expert center in Pau.

As was mentioned this morning by Patrick, in Africa, we have many short-cycle development opportunities which actually went to the back burner when we put the brake on the investment in 2015. And now with much more favorable rig market and optimized design to reduce cost, we're able to launch these small projects, which are mostly infill wells tied back to existing infrastructures, and the associated commitment of short terms and flexible and incremental production is coming very quickly from within a few months to up to 2 years.

In Angola, we are progressing with assumption of approximately 100 million barrels by the end of 2019, and these barrels provide high cash margin, greater than $35 per barrel at $60 per barrel environment, and are very profitable with internal rate of return greater than 15% at $50 per barrel. Thanks to our effort, unit costs have been cut by half since 2014. In Nigeria, we have more than 100 million barrels to sanction before the end of 2019 with high cash margins and strong profitability even at $50 per barrel. Like in Angola, we have simplified design and optimized the use of existing infrastructure.

But we're also working on the next phase of larger projects and here are 3 examples in Nigeria prolific deepwater domain, where our target is to take FID before 2020. First, Owowo on OML 138, with 1 billion barrels that we intend to tie back to Usan FPSO. As a result, the technical costs are very competitive for this development. Bonga South West on OML 118, with more than 600 million barrels developed from the stand-alone new FPSO with a capacity of 150,000 barrel per day. And finally, Preowei, our discovery on the OML 130 with more than 100 million barrels that will be tied back to Engina FPSO. As you can see, for most of these developments, we are trying to make maximum use of existing infrastructures to lower technical cost and to improve the profitability and lower the breakeven of these projects.

Now let's go to Brazil. Brazil is a growth area for Total with many world-class deepwater assets, which have been added to our portfolio at very competitive price as we were early movers. It started with our entry in Libra in 2013 and then the signing of a strategic alliance with Petrobras in 2016. This alliance gave us access to Lapa field as operator and to the giant Iara block. Brazil pre-salt deepwater domain benefit from a fantastic geology, providing low development costs. Reserves per well are 5 to 8x higher than in most other deepwater basins. Our resource are now adding to more than 1 billion barrel with about half of these barrels already sanctioned under production. And we have a pipeline of projects, as can be seen on the slide, with 4 FPSOs on Libra, Mero 1, 2, 3 and 4, each with a capacity of 150,000 barrel per day, and the first one has already been sanctioned. Libra giant field, with more than 3 billion barrel of oil on the same structure with excellent reservoir properties and the same oil quality, is providing a unique opportunity to design 1 FPSO and build several.

On Iara block, we will have 3 FPSOs, 2 of which are already under construction, and the recent well on the Sururu structure in the central part of the block has uncovered an oil column of 530 meter of net pay. This is the largest ever found in Brazil, so a very promising block indeed. Finally, we are working on the next phase of development on Lapa field to be sanctioned in 2019 next year. Altogether, we shall be producing more than 100,000 barrel per day by 2022 with CFFO greater than $30 per barrel.

Finally, the U.S. GoM, where we have recently grown our portfolio to get a new wave of development -- of deepwater developments. The current production from our equity interest in Tahiti and Jack fields is already contributing to $400 million of CFFO per year at $60 per barrel over the period '18 to '22. And with our discoveries on Ballymore and North Platte and a high-potential exploration portfolio, we have about 100 leases in the U.S. GoM with good prospect in the Norphlet and the Wilcox plays, not to mention our entry in Mexico, where we have 7 licenses we have reached with an operator. We feel confident to reach a material production of more than 100,000 barrel per day.

I now would like to zoom on 2 discoveries to illustrate our strategy in the U.S. GoM. First, the most recent and promising discovery of Ballymore in the Eastern GoM on the Norphlet play with resource estimated between 500 million barrels and up to 1 billion barrel. And 2 appraisal well will be drilled later this year to firm up this potential of this major discovery, potentially one of the largest in the U.S. GoM for nearly 20 years. Furthermore, this discovery can be developed very quickly with an early production scheme through available capacity in the nearby Blind Faith infrastructure. This will provide both an opportunity to reduce the time to market but also to derisk and optimize the full field development of Ballymore. We have also captured, as is illustrated on the slide, a number of blocks of exploration acreage with many prospect that could be tied back to Ballymore development.

Second, North Platte, and you see the map on the right side of the slide, operator discovery in the Central GoM, which is on the Wilcox Play. And we have fully appraised this discovery by 7 penetration, which has confirmed its potential for stand-alone development with a 75,000-barrel per day semi-sub facility tied back to nearby export systems. We're in the progress now of optimizing the well and topside design with the objective to take FID in 2020. And also, like for Ballymore, we have nearby several ready-to-drill prospect in the vicinity of North Platte.

To finish, I would like to look at our deepwater exploration potential in emerging areas. First, Guyana, where we've been able to capture several high-potential blocks on trend with recent discoveries, including our latest entry in the Orinduik block just after Exxon's recent Hammerhead discovery. Second, Mauritania and Senegal where we have had -- we have now a significant acreage in the deep offshore exploration domain. And we have already showed 3D seismic of our most of these blocks and we have several ready-to-drill prospects, which we'll start to drill later this year and in beginning of next year.

And finally, South Africa and Namibia, where we'll drill at the end of the year the Brulpadda very promising oil prospects in Block 11B, 12B with a semi-sub rig especially designed to operate in the demanding weather condition offshore South Africa. And we have already captured high-potential acreage in the emerging Orange Basin in Namibia, where we will drill the Venus prospect in the second half of 2019. Of course, I take the opportunity to mention what was mentioned in Patrick's presentation this morning about our discovery on Myanmar, which is also deepwater and which will be a nice, in fact, ullage filler of the Yadana facility. So altogether, we have a strong deepwater exploration portfolio with numerous drillable targets in emerging areas, targeting significant resources to be drilled in the next 2 to 3 years.

As a conclusion, a few takeaways. Thanks to our deepwater expertise built over several years, we are able to optimize development to reduce breakeven costs. As a result, deepwater is today for us a growing and very profitable part of the portfolio. We have a strong position in Africa with several major projects significantly contributing to cash flow generation in the next 3 years, and we are, at the same time, leveraging existing infrastructure to develop short-cycle projects. As an early mover, we have been able to capture at low cost a very sizable position in Brazil with a pipeline of projects on world-class deepwater assets. All these developments have low technical costs. Finally, we are building a material position in the Gulf of Mexico, and we are capturing high-potential acreage in the deepwater exploration domain to capitalize on our deepwater expertise with the objective to find large resources with low breakeven. Thank you.

I think, Laurent, now the floor is yours.

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Laurent Vivier, Total S.A. - President of Gas Division [3]
------------------------------
Thank you, Arnaud, and good afternoon to you all. I would like to present to you today not only how we are growing on these integrated LNG chain, but more of how we are capturing value and to monetize flexibility and the changes which have been occurring on this LNG market.

And as Patrick noted earlier, the LNG markets are continually defying expectations. Few of us would have predicted that China would become the second largest importer last year. The combination of competitive LNG pricing and the benefit of cost reduction across the chain from liquefaction to shipping and to regasification, coupled with favorable government policies to promote clean gas over alternatives have led to a voracious LNG appetite with a number of LNG-importing countries now exceeding 40.

China LNG consumption could reach close to 100 million tonne per annum in 2025, but it's no means limited to China. For instance, demand from emerging Southeast Asian importers and the list is long: Indonesia; Malaysia; Philippines; Myanmar; Singapore; Thailand; Vietnam could increase fourfold from now to 2025, reaching 50 million tonne per annum. For the so-called LNG glut, which some predicted, has not materialized. Asian spot forward prices remain very high today at an equivalent of around 15.6% of Brent for the coming winter and 12.5% Brent for the coming summer in 2019. As we can see on the right-hand side of the graph, the world will face an energy shortage by the mid-'20s without new LNG liquefaction projects being launched. As you will see later in this presentation, Total is preparing to take FIDs on a series of very competitive projects on all the major production basins.

But gas markets are not only evolving rapidly in scope, they're also changing maturity and moving towards being a commodity. The market is generally considered to be liquid when the churn rate, the ratio of traded commodity to throughput, exceeds 10. As we can see on the left-hand side of the graph, the Atlantic basin has already reached a very high level of liquidity with lengthy tenures. The churn rate for the U.S. benchmark Henry Hub stands at 50, while the combined rate for the 2 key European markers, the National Balancing Point in the U.K. and the Dutch TTF, has reached 37.

In Asia, there's still a long way to go before they can be deemed to be a liquid market with paper trade well below physical volumes, but it is nevertheless growing exponentially. It is expected that 30 million will be traded on the JKM benchmark priced for spot cargoes delivered into Japan and Korea, a tenfold increase over 2 years ago. And Total has played a major role in the growth of the JKM trading and adding liquidity, accounting for around 16% of the volumes traded this year. And we expect this liquidity to continue developing rapidly.

Let us turn now to our portfolio. We have succeeded in building an integrated portfolio strategically positioned in all major basins. Our recent acquisition of ENGIE's LNG assets complemented our existing portfolio by adding participating interest in liquefaction in the U.S. and in Egypt, long-term LNG sales and purchase agreements, an LNG tanker fleet, as well as access to regasification capacities in Europe, which supports our significant position in marketing.

We are a major LNG producer with 20 million tonne per year by 2020 on all the major production hubs. We have a fleet of LNG carriers, which will grow to 18 by 2020, providing us with significant shipping flexibility. We have strong relationships and a portfolio of long-term clients in Asia and parts of Latin America. We hold the largest regasification capacity in Europe, which, as a result of integration, allows us to supply our growing portfolio of around 6 million customers in Europe and the gasified power plants that we just recently acquired.

Outside of Europe, we are also pursuing integration by progressing projects in Asia, the Middle East, Africa, Latin America to develop floating regasification terminals and gas-fired power projects, thereby opening up new outlets. In short, we have all the ingredients and the global reach necessary to maximize value across the integrated chain. But as you can see also in the map, we have a pipeline of liquefaction projects very well positioned on the merit curve and strategically placed in each of the key production basins: Russia, Pacific Basin, Middle East and Africa and the U.S.A.

Russia is steadily growing as a global LNG supplier with links to China and Total's partnership with Novatek is unique among the majors. Yamal LNG has been a resounding success in the industry. It took 4 years from FID to deliver the first LNG cargo last December, ahead of schedule. The second train delivered its first cargo 8 months later, once again ahead of schedule, and we are on track to have the third train deliver its first cargo by early '19 or maybe even, as Patrick hinted this morning, by the end of the year.

Overall, this means that 16.5 million tonne per year of capacity was delivered in just over 5 years within budget despite the remote Arctic location. During the course of development, 142 modules were delivered over 2 years, making it the world's biggest modular construction. And of course, the marketing of the Yamal volumes was also a great success with 85% of sales committed under long-term contract indexed on oil. Novatek is now developing a fourth train that's below 1 million tonne with a cost target below $500 per tonne, taking advantage of existing facilities and the Yamal reserves.

The Yamal success owes much of strength of the partnership with Novatek. Our track record in Yamal significantly derisks the next giant project in the vicinity, Arctic 2, which fits perfectly of our strategy of developing LNG on giant low-cost onshore resources. As part of the deal, we acquired 10% of Artic LNG 2, which produced 18 -- 19.8, sorry, million tonne per year of LNG with 3 trains and that represents with direct and indirect interest a share of 21.5%. By capitalizing on our Yamal development experience, the target is to reduce construction cost by 30% compared to Yamal. By having the LNG trains installed on shallow water, gravity-based platforms, avoiding the necessity to construct on permafrost. There are also synergies in shipping the Yamal LNG carriers and facilitating the access and using the Northern Sea Route all year long.

Moving to the Pacific Basin. We are pleased to have achieved the milestone of first gas on Ichthys in July, and we expect the lifting of the first condensate cargo by the end of this month. The first LNG cargo is expected in November. Ichthys project unlocks 3 billion boes of gas with high liquid contents and involve the construction of 2 floating units, a long pipeline to shore and a liquefaction plant. The project is underpinned by solid long-term LNG contracts all indexed to oil. And together, Yamal and Ichthys will add around 250,000 boe per day for Total.

Moving to Papua LNG as well in the Pacific Basin. We are progressing with a highly competitive project that benefits from onshore gas with liquid content, synergies with existing liquefaction facilities and proximity to Asian markets. The LNG plant will be supplied by gas associated with the Elk-Antelope fields discovered by Total. The conceptual choice of the downstream is under discussion with our partners in order to maximize integration with the existing plant, therefore, decreasing cost.

Nigeria Train 7 is another competitive project with a sizable cost, low-cost gas resources in Nigeria and the obvious synergies with the existing facilities. The project consists of debottlenecking the existing plant and the addition of a new train of 7.5 million tonne per annum. The feed is ongoing and FID could take place in 2019.

And then moving to Qatar. Given our long history and close partnership with this country, we are, of course, interested by the opportunities arising interest from Qatar's plan to grow its production to 100 million tonne per year from the existing level of 75 to 80. We have been in Qatar for a long time. We are a strong partner. And the existing facilities are world class and synergies could be found to optimize the construction of 3 additional 8 million tonne per annum trains.

The U.S. is obviously well positioned to supply low-cost LNG and we have been actively expanding our exposure there. The Cameron project was a big part of the ENGIE LNG portfolio that we acquired and we are quite excited by the opportunity to add 2 more low-cost trains. We accessed a tolling agreement, enabling full integration in the gas to LNG value chain. The development of trains 4 and 5 have already been authorized by the U.S. authorities, so both the FERC and the DOE and developing these trains are priority for us. And we have strong partnership with Sempra, and of course, the Japanese partners. Tellurian, separately, in our acquisition last year of 23% of the shares in Tellurian allowed us to increase our exposure in the U.S. Tellurian is looking to developing project based on integrated model, sourcing low-cost shared gas and delivering low-cost LNG through modular trains concept.

To conclude, we have a very strong base to build upon. As of today, in fact, we are a shareholder in 12 LNG liquefaction plants that currently generate 25% of global LNG output. Based on our project pipeline by 2025, we expect to have taken 15 plants, producing around 1/3 of global LNG volumes. Together with our liquefaction capacity that I have detailed, we have also purchased quantities from third parties, allowing our portfolio to reach the size of 40 million tonne per annum.

At the same time, we consistently ensure that we maintain a solid physical base in our portfolio, with third-party sales and regas capacity supported by our marketing base in Europe. This means we have the comfort of knowing that we always have a physical outlet for our cargoes, when in practice continuously optimizing the flows to capture the highest margins wherever they lie at any one time. This physical balance provides us with a solid base case, the building block from which we maximize value. As you can see from the chart on the right, our exposure to price reviews is also well managed, with less than 10%, our sale contracts open to reviews before 2022, after which the market is expected to tighten. The limited exposure to price reviews was one of the strengths of the LNG portfolio.

Starting from this building block, which offers us a solid base case, we need now to optimize and generate additional value. And in order to do this, we need 3 elements. The first is portfolio flexibility. We have the contractual ability to place 65% of our volumes in which of our basin offers the highest netback at any one time, either because the contracts are flexible destinations or because we are able to reload them from Europe.

Secondly, shipping. We will have a fleet of 18 vessels, which is an important competitive differentiator. On this graph, you will see the decrease of cost for each cargo, which has been started under long-term contracts by Total for typical trip from the U.S. GoM to Asia. The steady development of this fleet allows us now to have some vessels with a travel cost of 60% lower than vessels which were charted in 2006.

Finally, by having access to regasification, we are able to constantly arbitrage between supplying LNG to the European market where we have a large marketing base or diverting LNG volumes to market elsewhere that fetch a higher premium and purchasing pipeline gas as a replacement. As you will see on the chart on the far right, we expect to reload 18 cargoes from Europe this year to take advantage of attractive Asian prices.

I would like to share now some practical examples of how we bring value to this portfolio. First, on the left, let's look at the practical example of physical optimization. All this will look a bit like plain vanilla to some of you who are a bit familiar with oil trading or oil products trading. But this kind of optimization was absolutely unthinkable 5 or 10 years ago in the LNG market with all contractual constraints that were existing. The starting point is one of our U.S. FOB cargoes coming from Sabine Pass. At first, the base case was a delivery to Europe. But then, in the second stage, we seized an arbitrage opportunity with the aim of diverting the cargo for spot selling to Japan, thereby adding margin with higher Asian prices. But we didn't stop there. In the third stage, we went for another arbitrage, bouncing a late call from spot selling to Mexico, thus re-diverting the cargo that had just crossed the Panama Canal to capture a further premium above Asian prices. And meanwhile, we are able to secure a cargo from Malaysia on the spot market.

This set of spot transaction generated around $2.5 per Mbtu extra margin for one single cargo and also freed up some shipping capacity. Obviously, we will not be able to do this for each and every cargo. But this sort of optimization is nevertheless recurrent. It is a case because we are in a unique position given our portfolio size, flexibility, shipping fleet with reduced cost, and of course, global reach. I must say that not everybody will be in a position to do these kind of things. You need to have the right building blocks, free gas, shipping, long-term contracts, trading and hedging capabilities.

On the right-hand side, we see an example of paper optimization before cargo loading. The chart shows appeared from September to November last year, which was marked by high market volatility. As can be seen on the graph, initially, Europe offered the best netback for U.S. cargo. But the tide then shifted to Asia and before going back to Europe, and then finally, ending up in Asia. By arbitrating between Europe, the NBP and Asia before the cargo delivery and by hedging the exposure, we were able to capture an additional margin. Those optimizations was physical and locking arbitrage between basins are monitored for each single cargo at any time in our trading offices in Houston, Europe and in Singapore.

So what is the result of all our efforts? Not just grow our LNG business but also to integrate across the value chain. We have become the world's second-largest LNG player among IOCs. Within the next 2 years, Total will be managing around 10% of the global LNG market. We are thus confident that integrated gas from wellhead to the customer will generate $3 billion of cash flow from operation within 2 years, and I have absolutely no doubt that we'll keep growing after that.

Thank you very much for your attention.

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Questions and Answers
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Mike Sangster, Total S.A. - Senior Vice-President of IR [1]
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(inaudible) the room.

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Irene Himona, Societe Generale Cross Asset Research - Equity Analyst [2]
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Irene Himona, Societe Generale. Just a question on LNG. (inaudible) the number of (inaudible). Can you talk a bit about what is the average length of your (inaudible)? And how does that change (inaudible) risks (inaudible)? And second question on deepwater. Initially, (inaudible) subsidy disabilities. So (inaudible). Can you talk about how these (inaudible) numerous (inaudible)?

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Laurent Vivier, Total S.A. - President of Gas Division [3]
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We start about the LNG. I think you mentioned the duration of contracts. I think that's not the only change, which is, in fact, happening on those LNG contracts. You have shorter durations. Usually, more flexibility in order to accommodate some demand from the buyer and more seasonality, for example. And I think that's one of the great strengths of being a portfolio player, having some volumes coming from different areas and having a larger portfolio that we are able to accommodate those kind of demands. The tenure of long-term contracts, which used to be 20 years on a traditional basis, now I would say traditional demands are between 7 and 10 years. And we are still able to secure for long-term contracts, i.e. usually linked to E&P projects, some 20-year contracts when the -- on typically on the projects I was talking about with a traditional price review. But as you've seen, we have limited exposure on this.

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Arnaud Breuillac, Total S.A. - President of Exploration & Production [4]
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Yes. On the subject of the deepwater cost, I think my presentation at -- one objective was for us to show that in our portfolio, we're very much looking on how to optimize the different part of the cost for deepwater development. I explained how we optimize well design, which was clearly in the (inaudible) one of the important cost for the product developments. It's clear that beside the fact that we've been able -- I mean, if I just take the 3 countries that I mentioned, West Africa, this is more than 100 wells and so we have been really able to optimize the design of each single well to reduce undeveloped casings. We've worked a lot on the way in which we prepared campaigns, which, by the way, something we inherited from our drilling factory in Indonesia, for example. And we see that the preparation in drilling campaign is something that makes a huge difference, which would work independently from the cost of steel or metal. So that's for the drilling. It's key also that we see in certain basins and Brazil is really the best example, fewer wells for development. If we look at the current early production that we have on Libra field, we have [Janeiro de] Libra, the early production scheme FPSO. We are producing 50,000 barrel with just one well. By comparison, in other deepwater basins, we need 4 to 5 wells to produce this amount. So this is clearly an area. When it comes to FPSOs, we've also optimized in the last 2, 3 years the design by looking at the complexities that was added by having several levels of process modules, one above another. I used to say that when you have a piece of equipment onshore, you can look at the cost of the equipment with its environment to be multiplied by 2. If you go to conventional offshore because of the fact that you're consolidating risk on one platform, you multiply it by 3 or -- just as a rough figure. On FPSO, because you are on effectively a tank of oil, you have multiplication by 10. So the superposition of layers of equipment on FPSO is actually a very significant cost driver to the design of FPSO. So we've done a lot of work on these in order to avoid different layers of equipment well above another. And one way, as part of the alliance we have with Petrobras, is by making the units more compact so as to avoid the superposition of layers. We've done also a lot of work on FPSO design, so that the constructability is much easier. And it's clear that, as I mentioned on Libra, when you're able to design one FPSO and to build several, you also have economies of scale. So what I'm saying is, overall, we have tried to work and this has been really an effort in the last 2, 3 years, all the different aspects of well subsea architecture and FPSO design so as to minimize cost. Of course, there may be some inflation on some of the metal, but the fundamental design change that we've made will mean that the cost reduction we are making this deep offshore development is much more cost effective. And we effectively see that we have low technical cost.

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Mike Sangster, Total S.A. - Senior Vice-President of IR [5]
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Okay. There's a couple questions over at this side, Jon, then maybe Lucas?

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Jonathon Rigby, UBS Investment Bank, Research Division - MD, Head of Oil Research and Lead Analyst [6]
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Two questions, I'll be quite quick. The first, just to follow up on that answer on the offshore. Is the point that you're making that effectively, through the projects that you're choosing and the way that you're choosing to go about them, you avoid this issue that I think people are finding somewhat difficult, a sort of paradox where the offshore oilfield service industry is saying activity rates are starting to pick up. We think that costs will start to rise. And the operators are saying, we can continue to operate, actually at a higher rate of activity, but within the envelope of our current CapEx. Is that the answer to that question, that you can raise activity rates, but you're comfortable through your efforts that the CapEx isn't going to rise? The second question on LNG. What level of -- portfolio activity in a large portfolio enables you to have visibility on the longer term, I guess, is to launch sort of backwards to launch FIDs or projects without selling all of the LNG as you might have done 10 or 20 years ago. What kind of level of presold LNG would you feel comfortable with as a proportion of your equity total to go ahead with a new project?

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Arnaud Breuillac, Total S.A. - President of Exploration & Production [7]
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So we'll start answering the first question. I mean, this was really shown this morning in the presentation. While you see that today, you have about half of the fleet utilization in terms of deepwater rig, half of the rig are still stacked, waiting for work. So it will take considerable amount of projects to be launched to actually get to a level where rigs will be freely utilized. I would like to highlight as well, and this is part of the previous answer that looking at West Africa, we have reduced the time per well and this is drilling and completion by 35%. And so we believe that we can be more effective. We need less rig, if you prefer, for the same development. So altogether, this is clearly going to help us to manage for quite some time the increase of capacity. With regards to the yards, again, this morning, you're sure about the fact that the yards, the large NPC contractors, are still very short of work. So there is still a lot of spare capacity around. I should mention that one of the present discoveries of Yamal LNG project has been the fact that we obtained extremely high quality and, I would say, reliability from the Chinese yards. So I will say today, the competition is much, much higher from all of these contractors, whereas for FPSOs, we consider that maybe 3, 4 years ago that there was no possibility to be in 10-year FPSO if it was not done in Korea. Now this is not the case. So I would say the market is much more open. So we believe that we can have some increase of activity resulting any impact on inflation for now.

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Arnaud Breuillac, Total S.A. - President of Exploration & Production [8]
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And for LNG projects, so far, despite this increase and decrease that we've seen, there hasn't been today in LNG project, which has taken FID without 100% of the volume being committed to long-term contracts. So it can be in 2 nature, either selling to third parties or asking some of the shareholders to take their responsibility as the off-taker and offering the security of the balance sheet for LNG project itself at its own perimeter. So that is still the case today. There is no full liquidity in the Asian market allowing an LNG project to be launched just per se and counting on the liquidity of the market. We need the physical balance and the safety of the buyer. That's what we are doing as Total, sometimes playing a role, not only being in equity but offering as well the strength of our portfolio trading so that we are a buyer in order to facilitate or accelerate an FID. But we are not there in terms of liquidity of market in order to be able to not need long-term LNG contracts from LNG projects.

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Mike Sangster, Total S.A. - Senior Vice-President of IR [9]
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Okay. I think Lucas had a question in the center?

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Lucas Herrmann, Deutsche Bank AG, Research Division - Head of European Oil and Gas [10]
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Sorry, 2 if I might, for both of you. Exploration, it feels as though you're increasing the risk profile of the spend again, i.e. that you're starting to push more back to the front here. I just wonder whether you could confirm that view and give us an indication as to how the split between near field and frontier is starting to shift again at Total. And secondly, on LNG, Laurent, on the ENGIE portfolio, my understanding was that a number of the supply contracts to ENGIE in Algeria were nearing the end of their life. Can you make any comments as to the longevity of Algerian supply or what you may be doing at the present time or have indeed done to extend supply, if that observation was correct to start with?

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Arnaud Breuillac, Total S.A. - President of Exploration & Production [11]
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So I'll start to answer on the exploration portfolio. Actually, we have done exactly the opposite. We've actually rebalanced the portfolio so that we have fewer overall, I would say, high risk, high reward frontier prospects and rebalancing towards, on the one hand, emerging basins where you have a proven carbon systems at work and when you have evidence of structural closure or stratigraphic trappings that you can demonstrate or validate through a direct hydrocarbon indicator. So I would say 50% of our portfolio, we have considered that we need about 35%. And we are about this level if we look at the next 3 years portfolio of mature exploration, which is near-field exploration like Glendronach, where you are drilling on known basins where you know there is hydrocarbon, you have discoveries and you're already drilling on objects that you've been able to identify in seismic. And I would like to add that from this perspective, all of the progress that we are making in use of digital algorithm for doing fast tracking of seismic interpretation is unlocking a lot of value. So there's a mature actually exploration, we believe, is going to be more and more successful with the skills, leaving about 15% for what I would consider to be the high-risk frontier exploration. So maybe I gave you the wrong impression with my side, but clearly, we're doing exactly the opposite. And we are coming back from a strategy where maybe a few years ago, we are going maybe too much to high-risk targets.

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Laurent Vivier, Total S.A. - President of Gas Division [12]
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And about the LNG portfolio, in particular, the Algeria contract, as you're right in saying that this contract has got an ending date, which is early '20s. It is, of course, a strategic importance to continue the discussion with Algeria, not only for political dimension, but as well because it underpins the use of some forced capacity, rigged gas capacity in south of France. So discussions have started, I cannot say much. But of course, discussions have started for renewal or extension of this contract.

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Lucas Herrmann, Deutsche Bank AG, Research Division - Head of European Oil and Gas [13]
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Laurent, can you just remind us what the volume was or the volume is that comes into ENGIE's portfolio from Algeria that is subject to extension?

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Laurent Vivier, Total S.A. - President of Gas Division [14]
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We will see what it will be.

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Mike Sangster, Total S.A. - Senior Vice-President of IR [15]
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I think Thomas has a question over on the left.

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Thomas Yoichi Adolff, CrÃ©dit Suisse AG, Research Division - Head of European Oil & Gas Equity Research and Director [16]
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Two quick questions on Brazil, please. You declared commerciality on Mero not too long ago, but you still have an exploration period on the southern and central panel of the Libra field. So I wondered if you could give us an update on any activity in those panels. If not, the planned activity. The second one, on Iara, if I remember correctly, Sururu has had appraisal wells drilled in the past and it's proven very heterogeneous. And some parts of the reservoir, especially the central part, has actually not flowed very well in the past. So I can see here that you've drilled a well and you talk about great net pay, but I wondered if you can give a little bit more color on the reservoir characteristics and whether it's finally flowing because that -- there's a big question mark, has been in the past. And maybe final question on LNG, but it might still be for Arnaud. Yamal, excellent project, Ichthys, shocking. What are the lessons learned?

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Arnaud Breuillac, Total S.A. - President of Exploration & Production [17]
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So I'll start with Libra -- question on Libra. So indeed, you're right. The development, I would say $3 billion to $4 billion of oil in the northwest panel where we see now for FPSOs and it's really one of the most remarkable field that we've seen to date in terms of deep offshore in the pre-salt because of the quality of reservoir and the productivity per well, I mentioned, up to $50,000 per day per well, which is quite incredible and the possibility to build -- to design one FPSO and build several, which is a dream for a deepwater development. We have indeed done some exploration, in fact, continued exploration on the central panel and the southeast panel, and we have identified some oil column but also some gas. And so today, we are continuing with the appraisal of this field. Of course, we are concentrating on the development of the best part of the field, but we are still doing the appraisal of the discovered resources on the rest of Libra block. And of course, we will try to see if there is an economical development associated with these discoveries. When it comes to Iara, you have essentially 3 fields that is well indicated on one of the maps presented this morning. So we have the BerbigÃ£o structure, which is being developed together with the southwest part of Sururu, where we have sufficient resources to have one FPSO. We have 2 FPSOs that will be located on Atapu, which is the field that is the most on the eastern part of the block. And then we had this huge Sururu structure where one of the concern was actually the distribution of the reservoir. And it was a very pleasant surprise to see such a thick reservoir, completely unexpected. And since one of the main concern in Sururu central was the density of resource, it's very good news. Now this is the beginning. We need to do the appraisal. We need to look at, of course, the reliability per well. But it is clearly today an upside from what we had seen initially.

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Laurent Vivier, Total S.A. - President of Gas Division [18]
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I don't know if I'm the best place but maybe Arnaud will take over for comparing Yamal and Ichthys and the lesson learned.

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Arnaud Breuillac, Total S.A. - President of Exploration & Production [19]
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It's 2 very different projects, but it's clear that we are in the process of looking at all of the ingredients that made Yamal LNG such a successful project. I think that we had a very strong supervision toward the project. We had very good contractors. We were, as I mentioned earlier on, first to go to China for the yards because Korean yards at that time were absolutely full and we find out that the performance overall was really much better than average. It was much better than expected by a margin. But on top of that, much better than what we had seen on much -- on a lot of the other yards. Particularly, what was remarkable is the fact that out of the 148 modules that were delivered in Yamal, there were very few punch lists or the amount of work to be done -- to be redone during the final commercial phase on the modules were very little. We knew for a fact that one of the key success to the Yamal project was going to be the scheduling of all the modules arriving in due time during the weather window on location. And again, all of these logistics worked very well. I think we must say that there was very good cooperation between all of the parties involved. Ichthys is clearly a project which had a much, I mean, more complex, in a way, architecture because you had 2 very large offshore platforms in offshore. In fact, an FPSO plus a CPF, a very large floating structure for the processing of the gas, initial processing of the gas, a 900-kilometer pipeline and then an LNG facility is built onshore in Darwin. What was surprising is to see that actually the productivity of the workers on Darwin in what you could consider to be a much more favorable work environment was about half of the one we had on Yamal LNG in a 600-kilometer north of the Arctic Circle. So we had to, I mean, see that the productivity of the workforce on Darwin was much lower than we had anticipated. We suffered clearly on Ichthys of the overcapacity -- or not overcapacity, of our load of the current yards because there's 2 main structures, the CPF and the FPSO, suffered from quality issues, which was valid due to the level of subcontracting of the Korean yards. So there was a lot of rework done offshore in an Australian offshore environment. So a lot of delays and over-cost resulting from, I would say, average, not to say poor execution of the work on the yards.

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Mike Sangster, Total S.A. - Senior Vice-President of IR [20]
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Okay. Maybe we can try and get 1 or 2 more questions before we break. And ask one question per person, please, so we get through as many as we can. So I think, Chris?

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Patrick PouyannÃ©, Total S.A. - Chairman, CEO & President [21]
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At the conclusion, is it better to work in Russia than in Australia? I can tell you, by far, I don't think Total will [afford] itself to other projects in Australia.

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Unidentified Participant [22]
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Can I ask you on the -- when your partner, Novatek, sold stakes or farmed down its stakes in Artic 2, it published at the time an NPV of $25 billion. Is that a number you recognize? Is that, in any way, related to an entrance fee for the farm in from Total? I hope that's a quick answer. And therefore, I'm going to squeeze in one more tiny question on U.S. projects. How do they rank compared to the others considering that there isn't necessarily an integration upstream?

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Arnaud Breuillac, Total S.A. - President of Exploration & Production [23]
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Okay. So on the first question, I will not answer the first question. The second one, which is related to outlook, do you want me to...

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Laurent Vivier, Total S.A. - President of Gas Division [24]
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It's about LNG, I guess.

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Arnaud Breuillac, Total S.A. - President of Exploration & Production [25]
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Yes.

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Laurent Vivier, Total S.A. - President of Gas Division [26]
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Okay. I think, definitely, when you consider the profitability of other projects down the food chain and from the wellhead or the platform down to the delivered price, we are trying to position ourselves on the right side of the merit curve. All the projects I have mentioned are extremely competitive. We are targeting a delivered price for each of those projects below $5 per Mbtu delivered into Asia, which we think allow them to be, despite cycles, to be competitive in the long run. U.S. projects add something to this. Firstly, they are dependent on the Henry Hub price, even if we are now fully integrated thanks to an equity participation in Cameron. We keep these optionality to leave the gas in Europe and stop lifting LNG. So that is an option which I think has got great value in terms of marketing and in terms of the contractual setup. We benefit from 3 destination, and I've tried to highlight in my presentation the value that it can bring to being fully in control of the flows. Usually, pure E&P, fully integrated projects do not offer this kind of flexibility because the priority is to offtake the product.

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Mike Sangster, Total S.A. - Senior Vice-President of IR [27]
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Maybe for the final question for the session, we have a number of people following the presentation online and there's a question being submitted from Biraj Borkhataria from RBC. So do you expect project financing for LNG projects to get more difficult as average LNG contract durations get shorter over time and as the market becomes more liquid?

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Arnaud Breuillac, Total S.A. - President of Exploration & Production [28]
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I can take it. Yes, it's clear that financing may be more difficult as a result of this, yes.

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Laurent Vivier, Total S.A. - President of Gas Division [29]
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I think, once again, it's our role as portfolio player to be able to offer this kind of security. Just as nice statistics, not a single LNG project which has been launched by the group does not have Total as a lifter part of the quantities. So it is now a recurrent scheme that we have in our mind, which is to participate by the lifting of some quantity in fast-track FID and to secure the financing of the project.

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Mike Sangster, Total S.A. - Senior Vice-President of IR [30]
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Okay. Thanks very much Arnaud and Laurent. Of course, we'll leave it there and we have a short break. And then we'll come back for the second session at 3:00.

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Arnaud Breuillac, Total S.A. - President of Exploration & Production [31]
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Thank you.

(Break)

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Presentation
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Mike Sangster, Total S.A. - Senior Vice-President of IR [1]
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So we have the same format again as the previous session. So we'll start with Bernard Pinatel, who's President of Refining & Chemicals, talk about expanding petrochemicals, then followed by Momar Nguer, who will talk about marketing and services of the future. Then again, we have a joint Q&A.

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Bernard Pinatel, Total S.A. - President of Refining & Chemicals [2]
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Okay. Thank you, Mike. So good afternoon. You've seen this morning that petrochemicals is one of the core strengths of Total. This part of the portfolio maybe in downstream is sometimes less known than the rest, but it's a strong contributor to the cash flow. Last Jan 2017, petrochemical delivered $1.8 billion of cash flow from operations and a return on capital employed of 30%. So you understand why it makes sense to invest or to expand in petrochemicals and what I intend to do in the next 20 minutes is to tell you how we are going to execute this growth strategy.

So let's first look at the market from a demand standpoint. You have on this chart the polymer PE and PP, which represent 50% of the worldwide demand. So you see that these 2 polymers, which also are the main polymers of Total and show you very nice growth, over 3% a year. It's been the case in the last years, it's going to be the case in the years to come. And this good growth is explained by very simple, good fundamentals. The first one, of course, are the demographics: new consumers, the emergence of the middle class. As you know, mega-trends as well. We all know that energy efficiency relies very much on substituting heavy materials by lightweight materials, notably in the transportation industry. So all of this drives the growth.

If you do the math and you translate this 3%, more than 3% a year of growth into tonnes, it represents -- it's equivalent to 5 million tonnes a year. So the market needs is 5 million tonnes a year of additional demand that we need to satisfy. And 5 million tonnes a year basically represent 5 world-class crackers. World-class crackers start at 1 million tonne a year. So every year, the market needs 5 more crackers to cope with the demand. If you do the math again and you look at how many new crackers are coming sanctioned or in projects in the world, it's close to 4. So 4 in the supply, 5 on the demand side. You see that it's pretty well balanced, which good -- which gives an overall good visibility on this market from a supply-and-demand standpoint.

The last comment I would like to make is recycling because I'm sure we have all in mind that recycling is an increasing trend, which could take share of a polymer production, of course. I will come back on this one at the end of the presentation to show you what we do to address this trend. But beside recycling, you see on the chart that the virgin part of the demand, virgin polymer part is still growing. It's still growing in 2025, it will still grow beyond, and that's why we feel that recycling is not a threat. It's more an opportunity complementary to serving the market with virgin polymer. But I will come back on that at the end of the presentation. So overall, a good business to be in, in terms of growth.

So what about the profitability? What are the main drivers which explain how to make money, let's say, in petrochemicals? If you have something to remember from this presentation, that it is all about feedstocks. Feedstocks represent above 60% of the cash cost in petrochemicals. If you enjoy a cost-competitive base in terms of feedstock, you have a winning combination. You see on the left-hand side that most of the petchem feedstocks are oil based, more than 60% as you see. Therefore, the oil-based crackers are the price setter for polymers. So polymer price are all linked to oil price.

On the other end, when you look at the right-hand side of the slide, you see that ethane, which is one of the main feedstock, is discounted to naphtha. You probably know, of course, why because it's a byproduct from the shale, from gas. It's very abundant. And of course, that commenced this discount. That's true also for LPGs, which come either from oil or from gas, where we have also significant discount compared to naphtha.

And last, but not least, we should keep in mind also that ethane can be also used as fuel and that cheap fuel gives an additional upside in terms of energy costs. And now when you bring the 2 sides of the slide together, you see that polymer price drive by oil price but -- feedstock decoupled from oil price brings a kind of winning combination, a little bit counterintuitive. The higher the oil price of a Brent, the better off you are when you produce gas-based polymers.

So how do we intend to grab this opportunity? You saw the slide this morning, so I'm not going to detail it too much. You see that we are currently conducting 3 large projects in the world, 1 in the U.S., 1 in Middle East, in Saudi Arabia; and 1 in Korea, so I will give you more detail in a few minutes. But all these projects basically rely on the 2 main levers of our strategy in petrochemicals. The first one, of course, is to leverage cheap feedstocks, and each of them does. And the second thing, of course, the second lever is to leverage the synergies from our integrated platforms. And you see that these 3 projects all rely on integrated platforms. Once completed, as you see, we will have a very well-balanced profile, with more than 60% of our production derived from these cheap feedstocks, ethane and LPGs, and more than 55% of our production coming out of the U.S. -- out of Europe, sorry.

So now let's have a look at the 3 projects. The U.S. first. In the U.S., we have a very large and highly profitable base. You see on this chart that our petrochemical business in the U.S. delivers its share, $1 billion of cash flow from operations, with $2.5 billion of capital employed. It's very profitable, and why is that? It's because we enjoy a high-quality asset base. You'll see on the slide first that we have in Port Arthur, Texas, a very large refinery, 200,000 barrels a day, deeply converting, which has been modernized in 2010. This refinery is fully integrated with a cracker in Port Arthur, which we share with BASF. It's a 1 million ton a year cracker, which can crack not only naphtha but now also ethane and LPGs. We're the U.S.' largest polypropylene site, with 1.2 million tons of capacity in La Porte, Texas. We also have the largest U.S. styrene-polystyrene facility in Carville, Louisiana, with more than 1 million tons of production capacity. And in Bayport, Texas, we are in the process of doubling the site's capacity to build a world-class site for polyethylene, and I will come on this one on the next slide.

Last but not least, I would like also to mention Hutchinson, which is a specialty chemical player, a market leader in specialty materials, elastomers for automotive and aerospace. So you understand why we are doing so well in the U.S. We are well positioned all along the value chain, starting from refinery up to crackers, polymers and specialty chemicals.

So let's have a look at our very first large project, the joint venture we have just set up early this year with Borealis and NOVA. We've -- if I had to summarize in a nutshell, with ambition to build a world-class leader going from low-cost ethane to high-end polyethylene. So this joint venture, first, is about investing in an ethane cracker, a 1 million ton ethane cracker in Port Arthur. It's $1.7 billion CapEx, it's extremely low. It's one of the cheapest one on the U.S. Gulf Coast. If you do the math and you divide this $1.7 billion CapEx by the 1 million ton of ethylene which will be produced, it gives you a cost of $700 per -- $1,700 per ton of ethylene, which is the second-lowest cost out of the 10 to 12 crackers which are now being built in the U.S. Gulf Coast. And why is that? Just because we leverage those synergies we have with the refinery in Port Arthur.

We also have in this joint venture a project, which has just been sanctioned, you saw this morning the press release. We have taken the investment decision to invest in a new PE line, Borstar line in Bayport, which will double the site capacity to more than 1 million ton of polyethylene. So you see it's fully integrated 1 million ton of cracker, 1 million ton of polymers. And I'd like to say that this joint venture, to some extent, is a perfect combination when you see what each of the partner brings to the joint venture. Total clearly brings all the integration, upstream, the platforms, the synergies; Borealis is going to bring the Borstar, with is the top technology in the field of polyethylene, and that's going to be a first in the U.S.; and NOVA brings, of course, the polymer presence, the market presence in the U.S. And by combining these 3, let's say, partners, we have kind of a perfect match, which will build one of the top players in the U.S. for polyethylene. The project is well on track and it's due to start up in 2021.

Let's move now to our second larger project, which is in Korea. As you know, in Korea, we have a joint venture with Hanwha, which has been a success story now for many years. The joint venture in Daesan is one of our world-class integrated platform. It's a top asset, we say it runs like a Swiss clock, even though it's run by Korean, it's like -- it's perfect. You see that this platform is a pace setter in energy efficiency, it's top quartile in terms of availability. So it's exactly the kind of asset we like. And you see also that in terms of financials, it translates into very significant cash generation, more than -- close to -- it's above $1 billion cash flow from operations. So it's a very nice success story.

And it's not a surprise, but we want to further invest in Daesan. And that's why we have sanctioned a low-cost debottlenecking project to increase our cracking capacity by 30%. But what's interesting there is that we increase our capacity to crack propane, so cheap propane coming from the U.S. And we have also sanctioned the reinvestment to increase our PE capacity by more than 50%, so which -- to bring it to 1.1 billion ton a year. And what you see very clearly that all these projects, which are to some extent the brownfield projects, let's put it this way, are highly profitable, with very attractive internal rate of return for a total investment, which is going to be in the region of slightly below $800 million of CapEx.

Third project, which is the newest one, that's SATORP. As you know, SATORP is our joint venture with Saudi Aramco in Dubai. It's been a good partnership, a strong partnership. We have there a refinery which we started up in 2014. It's a 440,000 barrels a day refinery, which has been debottlenecked early this year. You see that it's again a very good success story, highly profitable. We generate around $1 billion of cash flow from operations as well. So it's very cash generating. It's a top asset, top quartile in terms of availability. Fully converting, so there is no fuel oil produced in this refinery. And this refinery also generates more than 50% of distillates, which position it, of course, very well for the 2020 IMO regulation to come. So clearly, SATORP is going to be a winner in this new environment post-2020.

So you will not be surprised but we want to build on this success and the natural next step, of course, is to leverage this platform to build downstream a giant petrochemical platform complex. It's a $5 billion CapEx. You see that for $5 billion CapEx, we will invest in a 1.5 million ton cracker, which will crack more than 50% of advantaged feedstocks. We will have also some downstream units, one of them being again 2 lines to produce polyethylene. The FEED will be launched next month in October, and we target start-up by the end of 2023. And this project will deliver again a very attractive return with an IRR above 15%.

So I talked a lot about polyethylene because it was -- of course, polyethylene is the largest polymer in the world and, of course, we want to take benefit of a cheap ethane. But there is another feedstock which we like very much, which is propane, which is abundant and low cost in the U.S. And you know propane is used to do polypropylene among other things, and polypropylene also is a very attractive polymer. It's a polymer with high growth, which is used notably in the car industry. So they're really driven by the lightweight material trend once again. And that's also a polymer where we enjoy a very strong market position. We are the #3 in Europe. We are the #3 in the U.S. as well. So you understand it makes a lot of sense, of course, to look at this opportunity. And what we are currently very actively looking at are growth opportunities in the U.S. to expand our presence along all these value chain, the propylene value chain, once again, to take advantage of low-cost propane here in the U.S.

I would like also to mention in Algeria a project which is under study. Algeria is a country which has also plenty of propane, and we feel that there are some opportunities there as well to invest in what we call PP-PDH, so it's a unit to convert propane into polypropylene. It's a joint venture with SONATRACH, so it's currently in the -- under study. And the idea being, of course, there to serve the domestic market and also to serve Europe out of Algeria.

Last slide on the polymer, I mentioned at the beginning of our presentation you remember recycling as a growing trend within the polymer market. I could also have mentioned biopolymers. But at the end of the day, basically, this is all about participating to a circular economy. And I would like to give you 2 examples on how Total intends to play its part on the circular economy.

On the left-hand side on recycling, I would like to tell you a little bit more about the solution that we have developed, we call it the circular compound. Basically, it's about blending cheap recycled polymer which have poor properties with over-specified or over-engineered virgin polymer, which we call Booster. And by blending them together, we end up with a polymer which has basically the standard properties of a normal polymer. But by doing that, we manage to get the best of both worlds. We get the cheap stuff of a recycled polymer, we get the high margin of the Boosters, which is a kind of win-win combination, and we manage to recycle a proportion of 50% recycled polymer. So that's, I would say, a smart way to address the recycling demand from our customers.

On bioplastics, I would like to mention our joint venture with Corbion, a Dutch company, which is active in lactic acid. Here, we intend to develop the market presence in PLA, polylactic acid. Polylactic acid is a polymer derived from sugarcane. So it's not only a biopolymer, but it's also biodegradable, which brings many benefits, notably when it comes to use this polymer for single-use plastics. And you know, we are -- there's a huge debate about the ban around the single-use plastic. Using biodegradable polymers is a way to address this challenge. We are just in the start-up phase of a new site in Thailand, it's a 75,000 tons a year site, which will position us as the #2 in the world. And just for the record, the car you have on the slide there on the picture, this blue car, the body is made 100% out of PLA. So it can be used also for electric vehicles.

So as a conclusion, you see that much has progressed since last year, since the last Investor Day. SATORP now is in -- has been launched. The joint venture in the U.S. in Bayport is operational, the Borstar has been just sanctioned today. You see also that HTC, Hanwha Total Chemical, in Korea is progressing on schedule with the new project on PE, which has been announced in the meantime.

As I was mentioning at the beginning, petrochemicals are doing great today, $1.8 billion of cash flow from operations, 30% return on capital employed. That's the kind of ratio we like. The strategy is very clear, we leverage the feedstock, we leverage synergies through the integrated platform. By 2025, just to remind you, the profile of our business will be completely rebalanced. As you see more, than 60% feedstock, cheap feedstocks and more than 55% out of Europe. And our commitment is, of course, to generate by 2022 at constant petchem environment an additional cash flow generation of 20%.

Thank you. Momar?

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Momar Nguer, Total S.A. - President of Marketing & Services [3]
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Thank you, Bernard. On the marketing side, we'll be consistently delivering our $100 million CFFO per year over the period going to 2022. I'll be talking about our growth activities. For the legacy activities, suffice it just to say 2 words. First, our retail in Europe, we are consistently outperforming the market in Western Europe, first thing. Second, on lubricants, we are the only major company gaining market share over the last years. Now on the growth activities, first, we will be building on our existing retail network by increasing our revenues from shop food and services, by continuing to leverage our position in Africa, by expanding into digital solutions. And second by looking at alternative fuels mainly in LNG, bunkering and transport/road and on EV.

Now I'm going to zoom on some of the key areas of growth, the key drivers. I'll talk about our non-fuel business in Europe, I'll talk about our innovative transport solutions, I'll talk about Africa and I'll talk about the alternative fuels. First, our non-fuel revenues in Europe. Europe, we have a strong diversified offer of non-fuel products. These non-fuel products will represent 40% of our CFFO by 2022, 40% in 2022. We'll benefit from our strong card business, more than 300 million per year of transactions. We will leverage our 2,400 shops. In the network that we control, what we call company-owned substations, we have shops in 75% of those sites, just to give you an idea. On the card -- on the car wash, sorry, we have quite developed an expertise in car wash and I'll tell you more about that later. But we've become an expert in car wash -- Patrick is laughing. I'll tell you why he's laughing.

Now car wash, I love this stuff of car wash because some people may think that I'm just selling water. We're not just selling water, we have a strong concept. We are recognized -- take France, for example, we are a leader in France. We have close to 1,000 sites, car wash sites. The beauty with car wash is that when you think about EV and all those things, electric cars, electric or not, you'll always need to wash your cars. So I love this business because this is the business of the future, and we have enjoyed very good margin in this business because not only are we washing cars, but we are bringing what -- and car owners love that thing, water treatment, they are very sensitive to environment. And we've been so successful in that, that we've started developing that now outside our own network of service stations, especially in parkings or at customer sites. We intend to have 2,500 branded Total Wash come 2022, coming from slightly more than 2,000 by now. And we'll expand into 50 countries -- from 40 countries to 50 countries by 2022.

The second interesting thing is our AS24 transport concept. Now we have a network of close to 800 AS24 stations. AS24 is a concept for transport especially in Europe. There's one market that will continue to grow, whereas the noble market of main fuels will decline in Europe by 0.5%, 0.7% in the coming years. When it comes to fuel for transport, that market will continue to grow because the mileage for transport of goods in Europe will grow by 0.4% in the years going to 2030. Now we intend to increase the number of sites from 800% to 1,250% (sic) [800 to 1,250] in the coming years on the AS24. Now when you sell to the AS24 fleet, the customers, you are not only selling fuel to them, you are selling additional services. If I'm a transporter and I'm going from west of Europe to east of Europe, I need to use my car not only to fuel but to pay toll fees and that sort of thing, and that's the thing we're able to provide with our AS24.

Another example of what we are doing is our card business. We have close to 4 million card -- active cards in Europe today. And the volumes in card represent 50% of the volume we are selling in network in Europe. Now there too, the card owner is someone who is going to buy, in addition to fuel, a number of services. Basically, you will sell to a cardholder with diesel truck or cars, you're going to sell to them AdBlue, that solution that you use to handle gas exhaust in diesel cars. You are going to sell to them the usual shop food and services in the service station. You are going to -- we can even -- and we are selling more and more of that sort of a service, collection of VAT, for example, when you have a card and you are traveling into Europe. So we made acquisition of some start-ups, the WayKonect, the company we acquired recently is a company that will allow a fleet manager to handle the productivity of the drivers from point A to point B to be able to compare the driving behaviors and optimize the way it is -- the transport cost. On that business, our CFFO will grow by 9% between 2018 and 2022, going to $100 million by 2022.

Now Africa. In Africa, when you take all the retailers, all sectors, Total is by far the first retailer in Africa, which mean we are the company with -- the company, take all sectors, with the biggest number of sites in Africa. Now you have -- Total, you have the non-fuel retailer. The second one is Shoprite in South Africa and you see how we rank there. Now we'll continue to grow by selling traditional fuel because the African market in traditional fuel is growing by 2.8% per year. And there too, we've been consistently outperforming the market. But not only are we going to continue increasing our fuel sales in Africa, but we are going to increase our sales of non-fuel business. There's the upcoming middle-class, growing middle class to whom we are going to sell more and more services. Today, for example, we made investments in some companies, in some start-ups. And today in 8 countries in West Africa, you call in a service -- Total service station, you're able to pay your electricity bill or your water bill with a device at the service station. Those are the -- or you pay for your TV subscription, those are the services we are going to continue selling into Africa. That business of non-fuel will grow by 8% in Africa between now and 2022.

Natural gas. Laurent talked about natural gas earlier. We intend to -- and we've started some years ago to invest into natural gas for transportation. We made the acquisition of a -- in Europe, we made the acquisition of a company called PitPoint 3 years ago. PitPoint is a leader in Netherlands on natural gas for transport. We intend to be the market leader by 2022, because they have expertise and we have the network. So they are going to -- we are going to deploy natural gas for vehicles in 300 of our service stations in Europe, therefore making us the European leader for NGV. In the U.S., you read that we made -- we acquired 25% shareholding in Clean Energy, making us the biggest shareholder of that company. And in addition to that, we provide them with $100 million financing facility to support conversion from diesel to NGV of trucks. And that business will continue to grow and that leasing program is quite successful.

On LNG bunkering, you all know the IMO rules that will come in force in 2020, where the sulfur content will be reduced to 0.5%. We are leveraging in that, and we consider that one of the main alternative for HFO will be LNG. We signed a contract with CMA CGM, which is one of the biggest shipping group in the world. They are going to -- we are going to supply 9 ships starting from 2020. And we intend to reach 10% market share on LNG bunkering by 2025. With a hub in Europe, in the ARA zone, a hub in Singapore where we have signed a contract with Pavilion, we have a partnership with Pavilion Energy, whereby we'll be chartering a vessel for bunkering. In addition to that, we are going to have supply arrangement in Singapore, and we have another in Oman for LNG. In addition to that business of bunkering, we have signed contracts with Brittany Ferries. It may seem anecdotic, but it's very important that all type of customers get into this business of LNG.

Now on EV charging, we just want to -- if I was to summarize it, I'll say we are walking the talk. We want to be a key player in EV charging. Now coming from the car owners, we are able today to provide them with more than 60,000 charging points in Europe. If you are a cardholder of Total, if you are a customer of Total, I give you access to more than 60,000 charging points for your electric vehicles in Europe. In addition to that, if you are one of my customers, industrial customers, or if you're a hotel or if you're a municipality, with the recent acquisition we've made, we are able to come in your premises and do installation of charging points because we are selling charging points actually. And we are able to do the maintenance of your charging point, and we're able to assist you in optimizing your system.

In our own service station, we have a plan to have 1,000 charging points in our own service station by 2022. And we intend -- and looking at how, of course, the technology will evolve because I think there are yet some technological breakthrough to happen in this domain, we intend today to have 1 station with fast charging point every 100 miles in Western Europe. Every 100 mile, you should find a Total station where you can do fast charging. The acquisition we've made, the charging point operator we acquired is G2Mobility. They command today 25% of business to government in Europe -- in France. And they have 10% market share on B2B. So we are going to build on that to be the market leader there too. So present all along the entire value chain of electric charging.

Now before joining Bernard to answer your question, let me just summarize. M&S is a significant source of cash flow for the group. We have a target of $100 million per year. We are on track to generate $2.5 billion come 2022. Our more mature business will continue to grow and at the same time, most of our cash flow will come from non-fuel in Europe, from alternative fuels and from our traditional position in Africa.

With that, I'm joining Bernard for your questions.

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Blake Michael Fernandez, Piper Jaffray Companies, Research Division - Senior Research Analyst [2]
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I had 2 questions, if you don't mind. First, on Port Arthur, I realized you're highlighting the integration with the chemicals business. But I'm just curious, with the Gulf of Mexico potentially ramping to 100,000 barrels a day, I didn't know if it was possible to have that integrated into the refinery? Or if that would just continue to be more of a merchant-type refinery. Secondly, on petrochemicals, if you have return on capital employed around 30%, just curious if there's not some M&A opportunities to expand a little bit more rapidly instead of just continuing to grow organically?

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Bernard Pinatel, Total S.A. - President of Refining & Chemicals [3]
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I'm going to -- first -- the second question was on M&A, yes? Okay, it's something, of course, we are looking at. After all, it's always a trade-off between the opportunity which are in front of us. Just because you declare we are going to make M&A, but you, of course, find the right target. Knowing that -- when we look at the opportunity, we have greenfield or on our existing platforms by leveraging once again the feedstocks, the integration we have. We have very good projects with very high returns. So that's what we are currently doing. So we are considering both. But for the time being, of course, we are executing the last projects we presented to you. If we have, of course, M&A opportunities notably in the U.S., which once again is a very nice country to be in, as you understood from the feedstock, from the energy, for the environment standpoint, of course, that's something we will be happy to look at. Sorry, there was a first question, which was the (inaudible) on the Gulf of Mexico?

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Blake Michael Fernandez, Piper Jaffray Companies, Research Division - Senior Research Analyst [4]
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(inaudible)

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Bernard Pinatel, Total S.A. - President of Refining & Chemicals [5]
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Could you just repeat the question because -- once again, I'm not trying to...

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Blake Michael Fernandez, Piper Jaffray Companies, Research Division - Senior Research Analyst [6]
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Sorry. Yes. For a long time, Port Arthur has been kind of an isolated asset, just a merchant refinery running third-party volumes. I didn't know if, as you begin to ramp production in Gulf of Mexico, if there is an opportunity to run those volumes through Port Arthur and integrate that as well?

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Bernard Pinatel, Total S.A. - President of Refining & Chemicals [7]
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No. Today, we look at -- our refinery system is completely optimized, I would say, for our trading arm. And we look at the crude which are, of course, the ones which are the best suited to the refinery, for example, treat a lot of crude coming from Canada, which is very well suited to -- as a navy crude to the commercial profile of Port Arthur. And that's -- I would say it would be one, among many others, that we will be looking at. There's no specific game to further integrate the Gulf with Port Arthur.

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Mike Sangster, Total S.A. - Senior Vice-President of IR [8]
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There's a question from Christyan at the back.

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Christyan Fawzi Malek, JP Morgan Chase & Co, Research Division - MD and Head of the EMEA Oil & Gas Equity Research [9]
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Just 2 questions on the petrochemical outlook, particularly in the Middle East. There's obviously been some new expansion plans particularly out of the UAE around petrochemicals. And I wondered what you thought about in terms of sort of the competitive nature of that region? And to the extent to which everybody is now going into petrochemicals and building out capacity, how do you think of the balance of supply-demand sort of beyond -- around '21, 2022? And the second question, and maybe it's premature, but with the potential Saudi Aramco tie-up with SABIC, how does that affect, if at all, the project economics that you have at Total?

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Bernard Pinatel, Total S.A. - President of Refining & Chemicals [10]
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Now on -- your second question is along SABIC and Saudi Aramco, okay? No, I don't really see that as affecting our projects because basically, what we do and what Aramco is very keen on doing is to expand on their platform, on their existing platform into more downstream petrochemicals. So what we do in Jubail is something which is really -- which makes really a lot of sense at the boundary of Jubail, with Total and Aramco together because we leverage the synergies. SABIC is now downstream, it's another story. So I don't see there any issue; honestly, I don't see an issue. And your first question was on the expansion in the Emirates or...

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Christyan Fawzi Malek, JP Morgan Chase & Co, Research Division - MD and Head of the EMEA Oil & Gas Equity Research [11]
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No, too much supply in the region sort of over the next 5 years...

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Bernard Pinatel, Total S.A. - President of Refining & Chemicals [12]
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I'm sorry, I have a very hard time understanding. I'm sorry, but...

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Christyan Fawzi Malek, JP Morgan Chase & Co, Research Division - MD and Head of the EMEA Oil & Gas Equity Research [13]
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As everyone is building capacity, how do you think margins are going to trend?

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Patrick PouyannÃ©, Total S.A. - Chairman, CEO & President [14]
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No, but -- no, the question is about the -- are there -- the question is are there too many projects in the Middle East? Because Saudi Arabia is building projects, UAE is building projects and China is building projects.

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Bernard Pinatel, Total S.A. - President of Refining & Chemicals [15]
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We have a very strong base in Qatar, of course, where we have been, as you saw for more than 80 years. And it's a country rich with gas and ethane where we already have a very strong position. So certainly, it's something we could think about.

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Patrick PouyannÃ©, Total S.A. - Chairman, CEO & President [16]
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Let me be clear. As Bernard presented, in petrochemicals, as soon as you can be an advantaged feedstock, you have a competitive advantage compared to the naphtha crackers. And so it's a question that raised debate, with some countries building crackers and makes one want to be in Saudi Arabia or ethane in Qatar or advantaged feedstock in UAE, it will be competitive. To be honest, I'm more surprised when I see companies building crackers in China on naphtha because I don't see -- except the logistics advantage, I don't see where is sort of the competitive advantage of it. So to answer your questions, I think you have room to build more, I would say, advantaged feedstock crackers in the Middle East. It's not a question of competition. The market is not low-cost market, it's Asia, it's China.

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Mike Sangster, Total S.A. - Senior Vice-President of IR [17]
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We have a question from Martijn near the front here.

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Martijn Rats, Morgan Stanley, Research Division - MD and Head of Oil Research [18]
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It's Martijn Rats from Morgan Stanley. I wanted to ask you 2 questions, sort of related to refining and IMO. So earlier on, there was a slide, which I don't think is in your deck but -- earlier in the day, how you bring the fuel oil production from 7 million tons a year to 2 million tons by 2020. And I was wondering if you could sort of run us through that bridge in a little bit more detail because that went very fast, but it's a very large change. The second question that I wanted to ask sort of relates to this. So in some of the upstream sort of slides, there was a slide that referred to Total being well positioned in the upstream for IMO because of a relatively high share of crude being produced being quite low in sulfur. But in the downstream, you are also arguing that Total is well positioned for IMO given the sort of distillate yield argument. But I was wondering, is there a contradiction here where you would -- can you be both positioned well in upstream and in downstream at the same time?

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Bernard Pinatel, Total S.A. - President of Refining & Chemicals [19]
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It's really interesting because it's not necessarily the crudes we produce which are the crudes we process at the end of the day. There is -- so let me answer the 2 questions, maybe the very first one on the -- going from 7 million to 2 million. In 7 million tons of HSFO is what we processed last year. As you know, end of last year, we started up in Antwerp and the OPTARA Project, which is a conversion project which is aimed at reducing part of the bottom of a barrel, which is transforming to fuel oil to transform that into distillate. So basically, we have changed the balance in Antwerp from less fuel oil, more distillates. And that eliminate out of -- close to 3 million tons, if my memory is right. The second thing we do is we have some extra capacity in Port Arthur in the coker. So it's a 50,000 barrels a day coker, so we have to do some extra, some spare capacity, which we could fulfill with more vacuum residue and, therefore, also reducing our length in terms of HSFO. And the third thing we are doing is we segregate our vacuum residue. Because today, people do not segregate low sulfur and high sulfur because there is no spread difference when it comes to value we stream. Tomorrow with the IMO, people are going to be very willing to buy the low-sulfur part of the vacuum residues and they will put a premium on this; and that justify, of course, to invest, to segregate in the logistics the part which is low and the part which is high. And we have done this investment. And by doing these investments, we're able here again to reduce the length in HSFO. And the fourth dimension, if you remember, going from 3 to 2 is just to play exactly what you explained with the crude slate, the flexibility between the high sulfur and the low sulfur part of the crude we process. And by doing that mechanically, even structurally -- not mechanically, structurally, we come to 2 million tons of HSFO, which is less than 5% of what we produce worldwide.

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Patrick PouyannÃ©, Total S.A. - Chairman, CEO & President [20]
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There is no contradiction because in Total, between coal production and refining, you have trading. In fact, only 20% of our production is ongoing in the refining business and only 80%. So there is a lot of optimization being done by the trading, which is in charge to get the best value for the crude. So we will get the value for the loss for crude from -- for trading. And then the trading will look for high-sulfur crude, which will be less expensive for refining. So it's [overall just] mechanism. So trading isn't [the trend]. It's why there is no contradiction at all.

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Mike Sangster, Total S.A. - Senior Vice-President of IR [21]
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I think Irene had a question.

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Irene Himona, Societe Generale Cross Asset Research - Equity Analyst [22]
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Bernard, you mentioned Hutchinson in your presentation. You have sold out of all your other specialty chemicals in recent years, Bostik, Atotech and so on. You kept Hutchinson. What prevents you from selling it? And is there any sense of the financial contribution of that company to your $1 billion cash flow from operations?

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Bernard Pinatel, Total S.A. - President of Refining & Chemicals [23]
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So I'm going to maybe answer on Hutchinson from an operations standpoint and then I will let Patrick maybe answer on the...

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Patrick PouyannÃ©, Total S.A. - Chairman, CEO & President [24]
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No, you can answer. Yes, the answer is like Arnaud, there is no answer. It's a permanent question, so there is no answer. Permanent answer, no question.

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Bernard Pinatel, Total S.A. - President of Refining & Chemicals [25]
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Okay. I know, Irene, you keep asking the question at every session, I recognize.

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Patrick PouyannÃ©, Total S.A. - Chairman, CEO & President [26]
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Well, let me be clear, it's worth giving me the floor on that because this type of decisions, Refining & Chemicals, he's not in charge.

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Bernard Pinatel, Total S.A. - President of Refining & Chemicals [27]
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Exactly. That's why...

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Patrick PouyannÃ©, Total S.A. - Chairman, CEO & President [28]
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The sales of Atotech, the sales of Bostik was done by Patrick and myself. This type of -- we consider that as holding decisions, I would say, best allocation of cash [by CET] management of the allocation of capital of the group

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Unidentified Participant [29]
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(inaudible).

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Patrick PouyannÃ©, Total S.A. - Chairman, CEO & President [30]
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But you can answer...

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Bernard Pinatel, Total S.A. - President of Refining & Chemicals [31]
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No, no, but...

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Patrick PouyannÃ©, Total S.A. - Chairman, CEO & President [32]
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By the way, it's true that there is a nice contribution to the $1.8 billion CFFO. But it's a secret, so I'm not supposed to answer as well.

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Bernard Pinatel, Total S.A. - President of Refining & Chemicals [33]
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No, no, I don't quote any number. I'm just saying it's growing every year. It's really something which is running very well, increasing. It's high value-add margins, well-positioned downstream close to customers, a nice business with aerospace growing; the car industry, with this trend on lightweight materials, really -- so it's really a very successful business and we are glad to have it and...

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Patrick PouyannÃ©, Total S.A. - Chairman, CEO & President [34]
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Irene, you touched -- your question was right because the fact today Hutchinson is still in the portfolio is because it's sizable. It's a sizable contribution to these results.

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Bernard Pinatel, Total S.A. - President of Refining & Chemicals [35]
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And growing.

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Patrick PouyannÃ©, Total S.A. - Chairman, CEO & President [36]
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So it's just to enhance the value of Hutchinson for all the ones we want to buy. So it's quite sizeable at $1.8 billion...

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Bernard Pinatel, Total S.A. - President of Refining & Chemicals [37]
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It's sizeable and growing, and growing.

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Mike Sangster, Total S.A. - Senior Vice-President of IR [38]
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I think there's a couple of questions this side from Lydia and then maybe Jon.

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Lydia Rose Emma Rainforth, Barclays Bank PLC, Research Division - Director & Equity Analyst [39]
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Two questions if I could. The first one, on the biochemicals and the recycling side, what are the margins on a per ton basis for those, do you think, compared to what the traditional basis would be? So just any indication of profitability? And then the second one was on the Africa retail side. I appreciate this 8% per year growth, but do you think that's a business that you could grow quicker if you allocated more capital to it? And how do you think about that being the right rate of growth?

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Bernard Pinatel, Total S.A. - President of Refining & Chemicals [40]
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(foreign language) Okay. Sorry, I thought the 2 were for (inaudible). Now on biochemicals and recycling, no, it depends very much, let's be honest, on the oil price. It works. This business model on recycling works when the oil price is high. As soon as it goes down, the business model is less, let's say, challenging. What I showed you as an example is that there are smart ways to come around, and this compound, what I tried to explain, is a way to still make money even by using recycled products, which by definition have poor properties. So that's -- they are business model, that's why I was saying it's an opportunity, it's a growth opportunity in recycling. But we have to be smart to find business models which work. Of course, in a high Brent environment, it's even better; but even in low ones. And that's true also for bioplastic. The good thing with bioplastics is that it's also driven -- it could be tomorrow driven by regulation. And if we come to the plastic ban I was mentioning, people will be able to switch to these biodegradable plastics, so which is an additional lever which we can activate that is different from the...

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Momar Nguer, Total S.A. - President of Marketing & Services [41]
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Well, on Africa business, can it grow faster? Today, the market is growing by 2.5%. We are growing by 3.5%. Now what can make the market grow faster? If you look at Africa today, the bulk of the investments that are going into the continent overall are investments in road and ports and that sort of thing, on infrastructure in general. That will drive growth in transport in Africa because the key to -- when you talk to all the specialists of development, they will tell you that one of the drivers for growth in Africa is to increase the transport of goods from point A to point B to allow farmers to put their products into markets, have more and more intra-regional trade, and that comes with more transport, be it by road or by train or by boat. So that can be -- that can help probably increase the volumes of fuel that's being pushed into the market. In addition now to all what you can get out of, again, non-fuel business. Today in our service stations, well, the usual convenience store in many African countries now is the Total station. That's the convenience store that is open 24/7, that's where you go for a Coke or you go for -- so that business will continue to grow with digital because they are more and more being digital in Africa.

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Mike Sangster, Total S.A. - Senior Vice-President of IR [42]
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Jon?

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Jonathon Rigby, UBS Investment Bank, Research Division - MD, Head of Oil Research and Lead Analyst [43]
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So I enjoyed your comment about not wanting to give the finances of an asset that's not for sale just in case it comprises your negotiating position. Can I ask just on the expansion project in petrochemicals, am I right in saying that the CapEx numbers that you're quoting for those projects don't sit in your CapEx guidance numbers? It looks like they're too large to do that. So I'm guessing that they are funded off-balance sheet, is that correct?

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Bernard Pinatel, Total S.A. - President of Refining & Chemicals [44]
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No, no. They are part of the CapEx...

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Jonathon Rigby, UBS Investment Bank, Research Division - MD, Head of Oil Research and Lead Analyst [45]
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So the fund you've -- within the CapEx guidance that you're giving us, there's a full funding of your share of the investments into the associate companies that you've described?

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Bernard Pinatel, Total S.A. - President of Refining & Chemicals [46]
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No, there will be some project finance as well.

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Jonathon Rigby, UBS Investment Bank, Research Division - MD, Head of Oil Research and Lead Analyst [47]
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The reason I ask is that some of your peer give a gross and a net figure. So I'm just trying to understand the CapEx intensity that you're looking at into the petchem business.

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Bernard Pinatel, Total S.A. - President of Refining & Chemicals [48]
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That's the equity part, but there will be some project finance. And -- but what you see there is the equity part on the joint ventures.

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Jonathon Rigby, UBS Investment Bank, Research Division - MD, Head of Oil Research and Lead Analyst [49]
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In your CapEx (inaudible)...

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Bernard Pinatel, Total S.A. - President of Refining & Chemicals [50]
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In the guidance which we have given this morning, $15 billion to $17 billion a year of CapEx. These projects are part of this CapEx, and that's the equity part. We finance the project.

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Jonathon Rigby, UBS Investment Bank, Research Division - MD, Head of Oil Research and Lead Analyst [51]
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There is a portion of that which will be (inaudible) your associate company. Okay.

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Bernard Pinatel, Total S.A. - President of Refining & Chemicals [52]
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Exactly. Exactly, yes. No, no, there is no -- it's all square.

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Mike Sangster, Total S.A. - Senior Vice-President of IR [53]
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Maybe Thomas and then Jason.

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Thomas Yoichi Adolff, CrÃ©dit Suisse AG, Research Division - Head of European Oil & Gas Equity Research and Director [54]
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Thomas Adolff from CrÃ©dit Suisse. Two quick questions. On your cracking capacity outside of the U.S., I think you've invested a decent amount in increasing feedstock flexibility. So I wondered what the ratio now is between naphtha and propane, 70-30 or 80-20 or whatever it is?

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Bernard Pinatel, Total S.A. - President of Refining & Chemicals [55]
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You mean between naphtha and the ethane?

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Thomas Yoichi Adolff, CrÃ©dit Suisse AG, Research Division - Head of European Oil & Gas Equity Research and Director [56]
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Yes, propane or ethane or...

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Bernard Pinatel, Total S.A. - President of Refining & Chemicals [57]
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Well, it was -- we have today 40% of ethane LPG and 60% of naphtha, which is the current split. And it's going to be exactly the other way around in 2025.

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Thomas Yoichi Adolff, CrÃ©dit Suisse AG, Research Division - Head of European Oil & Gas Equity Research and Director [58]
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And the capacity between base chemicals and the second derivatives, a steady balance in your portfolio?

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Bernard Pinatel, Total S.A. - President of Refining & Chemicals [59]
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You mean base chemical and?

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Thomas Yoichi Adolff, CrÃ©dit Suisse AG, Research Division - Head of European Oil & Gas Equity Research and Director [60]
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Second derivatives, so it's polyethylene, polypropylene...

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Bernard Pinatel, Total S.A. - President of Refining & Chemicals [61]
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Polypropylene, no, it's going to be -- it's all integration. As we are integrated, there is no length, so it's all balanced, yes.

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Thomas Yoichi Adolff, CrÃ©dit Suisse AG, Research Division - Head of European Oil & Gas Equity Research and Director [62]
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Okay. Quickly, on LNG bunkering, LNG trucks. How big do you think the market will be by 2030?

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Momar Nguer, Total S.A. - President of Marketing & Services [63]
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How big the market will be on -- we consider that the market for LNG bunkering, that's easier. Because for the road, it has a lot to do with regulations and with incentives government or municipalities can put. But on LNG bunkering, the market is supposed -- we expect the market to be around 10 million tons, out of which we expect to be doing 1 million ton, 10% market share on LNG bunkering. Now on LNG for road, it's really a question of -- for example, today in Europe, you don't have that much of a fleet for NGV trucks, unlike in the U.S. So there's -- you need to build a market, probably need to have discussion with EU and the rest.

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Mike Sangster, Total S.A. - Senior Vice-President of IR [64]
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Jason, I think, had a question.

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Jason Gammel, Jefferies LLC, Research Division - Equity Analyst [65]
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It's Jason Gammel with Jefferies. My question is also on LNG as a bunkering fuel, and it seems to me that most of the discussions right now are whether to use marine gas oil or to convert to scrubbers. And I'm supposing that's because the vessel would have to be a new build vessel if it's not an LNG carrier. But it's hard to get people to build new vessels if there aren't supply hubs. So I'm just wondering how you're managing the build-out of supply hubs and whether these negotiations that you have that are being contracted with shipping companies are providing assurance of the supply actually being there?

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Momar Nguer, Total S.A. - President of Marketing & Services [66]
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I think today on that business, there are still -- all the options are on the table. You have -- on the new builds, you have companies opting -- likes of CMA CGM, opting for LNG. You still have companies saying that they will go for scrubbers. The issue with scrubbers which is yet to be resolved is the issue of how do you handle the -- okay, of course, it should be dual open loop, closed loop. But the question is how do y handle the waste? And the second question is today, we know what the regulations are for 2020, what if after 2020, IMO come with stiffer regulations and then how will they manage that? So what we're hearing from the market is that, yes, some are opting for low sulfur -- low-sulfur diesel, hoping that by then, products will be available. Some others are going for LNG. We have customers today we are discussing with who say that definitely they will opt for scrubbers on the new build or they'll revamp their existing fleet with scrubbers, and we are discussing with some of them. All options are on the table. Today, we are not really seeing a straight line on the way forward. I think they are weighing all options. Knowing that, I think the thing behind is that regulation may get stiffer.

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Mike Sangster, Total S.A. - Senior Vice-President of IR [67]
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Any more questions? Chris, then maybe Henry.

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Christopher Kuplent, BofA Merrill Lynch, Research Division - Head of European Energy Equity Research [68]
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A question for you, Momar. Can you give us an idea of the cost of upgrading, so to speak, of your retail network? So for example, the 1,000 stations that you're planning to equip with charging stations, what part of your CapEx budget is that? Just wondering how that budget is broken down.

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Momar Nguer, Total S.A. - President of Marketing & Services [69]
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I'm not sure I understand completely the question. The cost of EV charging -- no, the cost -- EV charging? Now depends on the type of EV charging. If you want to install slow to normal charging point, you are talking in Europe of a cost between $50,000 and $100,000. If you're talking of fast charging, today, where we are in terms of technology, you are talking of between $300,000 and $500,000. To be honest, today, people do not really see the economics of fast charging, but that market will come. But that's where we are today. But I'm sure that there will be some technological breakthrough into that domain. The other question was on the cost of retail network? No, that's -- okay.

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Henry Michael Tarr, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [70]
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It's Henry Tarr at Berenberg. Just a quick question. So longer term, ethane, obviously, looks like an advantaged feedstock. Near term, ethane prices have spiked and margins have come a bit lower. What's driving this? And how long do you think it's going to take for this to clear in terms of the supply that's come on recently?

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Unidentified Company Representative [71]
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(foreign language)

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Bernard Pinatel, Total S.A. - President of Refining & Chemicals [72]
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I'm sorry, but I have a hard time, I don't know what you're saying. No, you're right, ethane prices has gone up, it's around, what, $6 million to $7 million -- $6 to $7 per million Btu currently, coming from, let's say, (inaudible), which has been -- really spiked. The reason is very simple, there is a bottleneck on the fractioning unit. Today, we are completely saturated. In fact, you know it, of course. And there is also some bottleneck on the Midstream, where all this cracker are starting up. So there is a huge demand and a concern on the supply. What we see basically is when we do all the math is that it's going to be debottlenecked by mid of 2019. This is what we anticipate, which for us is, of course, a good thing because our [cracker] is going to start much later on. So there is no issue from that standpoint. So but mid-2018 -- '19 -- mid-2019.

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Mike Sangster, Total S.A. - Senior Vice-President of IR [73]
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Maybe time for one last question. Lucas?

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Lucas Herrmann, Deutsche Bank AG, Research Division - Head of European Oil and Gas [74]
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Sorry, 2, very briefly. The first one, Bernard, should we care about La MÃ¨de and the biodiesel upgrade? And I say should we care just in the context of numbers that we end up seeing. And the second question was, Patrick, you mentioned about a year ago that maybe this was a sensible time to, should we say, let refining capacity go. I guess the broader question is are you very comfortable with your refining footprint now? Or is this a sensible time to let refining capacity go?

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Bernard Pinatel, Total S.A. - President of Refining & Chemicals [75]
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So I'm going to answer on La MÃ¨de, of course. Yes, we have this project in La MÃ¨de to produce HVO, which is, let's say, the high grade to produce biodiesel. Why have we done it just because the market is growing? We have a mandate in Europe, there's a new regulation, it's called RED II, which is now targeting an even higher percentage of incorporation by 2030. So what we have done in La MÃ¨de made a lot of sense from that standpoint to meet this growing demand. So and your second question was refining capacity, is Total at the right level. That was your question?

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Lucas Herrmann, Deutsche Bank AG, Research Division - Head of European Oil and Gas [76]
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Just the footprint, are you happy with it? Is it -- the observation a year ago when refining was, should we say, having more than a renaissance, but very robust, was this maybe an appropriate time to let -- to consider altering the portfolio, letting assets go. Are you happy with your footprint?

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Bernard Pinatel, Total S.A. - President of Refining & Chemicals [77]
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I will say we have reduced, you'll remember, our capacity by more than 20% over the last 5 years because it's a very cyclical industry, and we have reduced, let's say, the refinery, which we have the weakest one. We don't want to increase, that's true. If we have opportunities to further reduce, because we know that the market once again is going to be cyclical and there will be more to come, of course, we'll consider it.

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Mike Sangster, Total S.A. - Senior Vice-President of IR [78]
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Okay. Thanks very much. Maybe we'll take another short break.

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Patrick PouyannÃ©, Total S.A. - Chairman, CEO & President [79]
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As a last remark, to avoid any misunderstanding, we are not seller of Hutchinson.

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Mike Sangster, Total S.A. - Senior Vice-President of IR [80]
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I think if there are some more questions, I'm sure Bernard and Momar can answer your questions during the break. And we should come back here at half past 4 for the final session.

(Break)

==============================
Presentation
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Mike Sangster, Total S.A. - Senior Vice-President of IR [1]
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Okay. So while everyone's taking their seats, just let me introduce the final 2 presentations of the day. So we have Marie-NoÃ«lle Semeria, who's the Chief Technology Officer, who will talk about leveraging -- how we're leveraging new technologies. And then Philippe Sauquet, who is the President of Gas, Renewables & Power and Strategy and Innovation, will present on integrating climate into strategy. And then as with the previous sessions, we'll finish with a Q&A. Thanks, Marie-NoÃ«lle.

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Marie-NoÃ«lle Semeria, Total S.A. - Senior VP & Group CTO [2]
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Okay. Thank you, Mike, and good afternoon, everyone. So I'm Marie-NoÃ«lle Semeria. I'm quite new at Total. I joined the group in November last year after different position in high-tech companies, start-up and into big research in high technology. And so when I arrived at Total, I was very impressed by the high level of technology and by the full commitment of people to deliver. And so my task is to enable new technologies and new skills to support the different businesses of the group and to prepare the future. And there is plenty of innovation here.

So today, I will focus my talk on technology and more specifically on digital technologies, showing how they leverage value for the group and for the shareholders. So on your left, you can see the topics I will go through. On the right, you see the overall R&D budget, accounting for $1 billion per year and the top focus areas, that is of course: safety, operational efficiency, low carbon mix, new services and new products, open innovation and digital technology. Digital technology account for about $300 million this year, and we're expected to increase that by about 3% per year. Total is more and more recognized as a differentiated leader in technology. It's through R&D and digital innovation that Total maintains its leadership position, and you can see that it's major commitment by the group.

So I will start with industrial digital. It's to say digital for industrial application. So the 2 main pillars are robotics on the one hand and artificial intelligence. And so let us start with robotics. Robotics refer mainly to unmanned autonomous vehicles that perform inspection tasks and collect data. We use robots to reduce cost of inspection, to improve safety, especially in harsh environments, to increase the integrity of our installations and collect more data -- more reliable data, which is key for the next step related to artificial intelligence. Here are some of our robots, all world first. We estimate their global impact to 20% cost reduction at the average.

So let me introduce to you the first one, ARGONAUTS that some of you know already. This is an inspection robot that we have tested in North Sea last year, and that we tested in a real production site at Shetland Gas Plant last week, with success. The autonomous underwater vehicle is also an inspection robot that we have used in the Gulf of Mexico along pipelines. Another underwater robot is the glider that we used in Angola for subsea surface exploration for several weeks, getting rid of any very expensive supervisory shape, replacing it by a simple web interface and satellite communication.

And on the far right, you have a seismic drone. Picture in your mind a fleet of drones dropping hundreds of thousands of biodegradable seismic sun cells that collect and transmit high-quality, high-density 3D data, saving between 3 to 5 years for final investment data collection -- for final investment decision. We tested it in Papua New Guinea last year, avoiding sending people into jungle, and providing more dense and better data collection. More value for less money and more safety, more reliability. This is the message here.

So we've seen the first pillar. Let's go to the second pillar, artificial intelligence. So artificial intelligence refers mainly to the way we learn from big data. We develop more and more artificial intelligence to automatize routine repetitive task, and increase productivity. Total is a big data company. It's a big industrial data company. And as a huge contracting capacity on premises, ranking #2 in the top 500 of industrial computers, and we will increase this capacity for critical algorithms.

For artificial intelligent, Total is ahead of its peers. We want to reinforce our leadership through the partnership with Google. We are the only online gas company that is a joint team of 30 experts based on the Googleplex campus in California. We are the first company to apply Google code and artificial intelligence on a real data set in geoscience. What is at stake? Each year, we spent about $400 million for seismic acquisition and interpretation, and we have not enough time to export all the data and about half of our time is spent on routine analysis. So the goal is to develop artificial intelligence as a cognitive assistant so that we can exploit more information and dedicate more human expertise to high-value analysis. So once again, less time for more data, and more time for high added-value task.

We extend artificial intelligence to downstream. What is at stake? Increased competitiveness of our existing refineries through optimization, real-time maintenance and performance monitoring. To accelerate digitalization, we decided to partner with Tata in July this year and to create a center of digital innovation in India, and we dedicate a joint team of 30 experts in Pune. Tata Consultancy Services is one of the largest IT consultancies in the world, with 400,000 [folks] over more than 40 countries known for their Agile methodology and IT experience.

So the goal is to implement the Refinery 4.0 pilots at our refinery at Donges, in France. And so we apply artificial intelligence to the entire refinery suite, including supply chain. Using cloud technology and Internet of Things to create a digital twin and optimize performance and productivity. Total is the first to develop an advanced production management platform that brings all the pieces together in real-time, maximizing availability and margin and increasing maintenance and energy efficiency. The message is real-time data management through artificial intelligence leads to increased competitiveness and margin.

So we saw robotics. We saw artificial intelligence. And in between, there are smart rooms, a key element in the digital chain connecting robots and remote sensors to human expertise and artificial intelligence. We currently have 25 smart rooms across the group. Some located near important assets like Angola, Nigeria, U.K., Argentina, and others concentrated to -- around our technology center in Pau or in Houston. Total differs from its peers by specific smart rooms. For example, for rotating equipment, where smart rooms anticipate major failures, sometimes 6 months in advance, reducing nonproducing time. For drilling operations, where smart rooms reduce risk and increase production through real-time monitoring or metering, where smart rooms save time of FPSOs with high-quality data. We have saved tens of millions of dollars thanks to smart room integrated to our digital implementation chain. In short, this is digital cost reduction through better efficiency, safety and performance.

Moving from industrial application to digital mobility and marketing, we will see that here, again, digitals create small value for less money. Imagine Total service stations that automatically recognize your vehicle as you are approaching the station, top off your battery and your fuel tank with a robot, offer personalized services. It has already started with Total Wallet Mobile Payment, deployed in Belgium, and now in Germany, and that will be extended to 1,000 stations in Europe by this year. And more services are to come, like our B2B fleet management strategy on new services based on Internet of Things. Thanks to our customer data management platform, we will be able to propose more personalized services to more customers. More digital for more users and more services. This is the message here.

Blockchain is another area of digital technology. Most of you already be familiar with the blockchain, which simply said, makes all transaction completely secure, untraceable and private. So main application for Total is the commodity trading business. We are part of a joint initiative with 9 major European players. And the initial cost savings could be significant, using blockchain as a unique and reliable digital identifier as potential applications in many other arrays. So starting early, to catch more value. That's what is at stake.

Another example of how the world around us is going digital smart electricity, half of our electricity sales are digital. With just over 300 employees, we can manage about 3 million customers. It takes less than 10 minutes to subscribe to the service online. No paper. And it costs less than $70 to get a new customer. Nobody does it better. Digital technology enables this low-cost business model. And we offer other digital services like ATOME for real-time monitoring of your power meter for WiFi; On/Off, which is the ability to remotely switch on and off your equipment to manage your power consumption; or OCTOPUS, which is a B2B service to optimize energy consumption globally for various sites and plants. Digital services are fundamentally changing the way that businesses related with customers. By leveraging these new technologies, we can offer more for less.

New technology creates new opportunities. To move quicker and learn larger, we promote high-profile partnerships and commit $150 million a year to universities. CCUS, which refers to carbon capture, usage and storage is a good example of partnership ranging from Upstream research with universities up to commercial test bench. Total is part of the Northern Lights project in Norway with Equinor and Shell, which is the first project at the industrial scale, targeting a storage site designed to receiving CO2 from industrial sources coming from several countries.

We're also involved in a partnership supported by China and Europe to demonstrate a pilot unit for power and steam production using chemical looping combustion, which isolates a pure stream of CO2 for storage. Finally, we have dedicated about $20 million over 5 years to Stanford and the Lawrence Livermore National Lab for developing a unique simulator of CO2 storage at a gigaton scale. We believe that CCUS is mandatory to achieve carbon neutrality in the second half of the century, and so we dedicate up to 10% of our R&D budget to that. So we are taking position now to be ready tomorrow when CO2 businesses comes.

Investing in startups is another way to be on the move, scouting technology and new businesses to accelerate innovation. On the right, you can see in green our historical investment in startups; and in other colors, the new targets in mobility, digital, climate and energy management. We invest $200 million in that. We have a new focus on China, which has huge potential in mobility and New Energies, and we have committed $75 million there.

As a conclusion, we are approaching the boundaries. And without overstating the issue, we are developing new technologies that will change the way Total provides a safe, clean and affordable energy. Total has a strong internal commitment to maintain a leadership position on the front of technology and digital. The overall performance, the ability to relentlessly execute and deliver while cutting costs and increase efficiency are signs that effectively implementing digital technology is creating value for our shareholders.

And that concludes my remark. Thank you, and now I will give the floor to Philippe Sauquet.

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Philippe Sauquet, Total S.A. - President of Gas, Renewables & Power and President of Strategy-Innovation [3]
------------------------------
Thank you, Marie-NoÃ«lle, and good afternoon to all. Good news for you is that this presentation is the very last of the day. I hope it will be the very best, but you will decide about that.

My purpose will be, in fact, to try to explain to you what we mean when we said some 2 years ago that we were willing to integrate climate into our strategy. And going a step further, you will see that we have tried also to answer one question, which was, how can we measure the long-term trajectory of our company in terms of carbon emission intensity?

So I will start by a slide that you've already seen with Patrick this morning, and I would say this is the most important slide because you have everything on that. You have on the left part the IEA 2-degree scenario with key prevailing trends. And you can discuss, of course, about the figures, but it's difficult to argue about the trend that are followed by any kind of virtuous scenario that will take into account climate change. What do we see? And what do we conclude of that? Threats and opportunities.

We see that coal is shaking. Good news, we decided to exit already more than 4 years ago now. We see that oil is slightly declining. Might have a debate once again about we'll be right or wrong, but what is clear is that we must be careful about selecting our project because we could end up in a much more competitive oil environment than the one that we live in today. And therefore, we are adamant that our future project will be low breakeven, and we have illustrated that in the movement we have been doing for the last 2 years, including in the Middle East and in Abu Dhabi. What we see also is slight increase of natural gas. And again, natural gas is a core business for us. And so when we see growth, we shouldn't be ashamed of trying to continue expanding in the gas value chain.

And last, what we see also, and this is, for us, a big opportunity, is the fantastic growth of the renewables. Renewables, of course, are a diversification for us; it's a diversification, I should say, for every company because it's fundamentally a new business. But what is clear here, there is a growth opportunity, and we'll try to evidence to you. We think that we might be successful in this diversification.

First item, to be -- I would say, to lead the -- to walk the talk and to be exemplary to reduce our carbon footprint, of course, we must improve our operation. And this is the very first driver that we use. We optimize the energy that we are consuming in our industry, all our facilities. We have already reduced by 30% our greenhouse gas emissions since 2010. We have ascribed very clear objective, minus 1% per year from 2010 to 2020. And today, we are ahead of schedule on this objective. We have taken also a very clear commitment in the E&P routine flaring with 0 routine flaring by 2030. And again, we are in advance compared to our commitment. And so we are constantly investing on reducing the energy consumption.

Methane. Methane is a new theme for -- I wouldn't say for Total. In fact, it's a new theme for the gas industry, which has started to be criticized mainly by our coal friends who have been forgetting that the coal mines are also emitting methane. But it's clear that we want to be exemplary also on that front. Methane has a very huge power of greenhouse gas compared to CO2, so it's, of course, a requirement for us to be exemplary, and we intend to continue to monitor our emission and to reduce them at the level of The Oil and Gas Climate Initiative. There has been a collective agreement to reduce to 0.25% these methane leaks by 2025. For Total, we have selected a stricter target of below 0.2% on a sustainable basis, and we are already much below 0.3%.

And last but not least, it's important also that we test, we evaluate all our new investment for a more stricter environment in terms of climate, in terms of carbon price. And we test, we evaluate every of our investment with a carbon price. It's depend on the area, but it's a minimum of $30 per ton and can increase by $40 per ton.

Second development, which is, of course, of importance to us, and again, it has been already described, it is the development in gas value chain. There is growth clearly in this business. We have even higher growth in LNG. You've understood that it was a core business, and historically, we have always been one of the leader of this industry. I'm sure that Laurent has convinced you that we had unique capabilities to be very competitive on the long term in this business, so it's clear for us we want to go deeper and we want to grow stronger. This is why we position ourselves as a buyer of the NG business, giving us this 10% market share that we intend, of course, to keep. We are ideally positioned, I don't know whether it's a golden triangle or golden square. But clearly, being in Russia, being in Middle East, Qatar and being in U.S., complementing that, these 3 position via a brownfield project be it in Papua New Guinea or Nigeria, you can be sure that we have a portfolio of new project that will be among the most competitive of the industry. We won't be the only one, of course, willing to develop, but we are ideally positioned.

We have started a strategy of opening new LNG markets. We see a lot of potential for growing electricity from gas in emerging countries, and we are willing to step up in order to facilitate and facilitate also our sale of LNG. LNG for transportation, I won't to come back on that. Momar has described what we are doing. And of course, gas marketing. We want to integrate the gas chain. Gas marketing is not a diversification for us. We have been present in this business since more than 20 years now. We have been leading the B2B U.K. business, which is one of the most competitive, and therefore, it's natural for us to continue on the chain.

Moving now to low carbon electricity business. Of course, here, it's a bit more exotic and -- for Total, and we have to agree that it is a diversification. But as it was said this morning by Patrick, we see in this business, and especially on the business on which we want to focus, the renewables and the gas, with low carbon electricity business, we see fantastic growth opportunity.

And on this electricity chain, it is a diversification, yes, but we have a tool to succeed. It starts by marketing of electricity. It's not widely known, but we have been marketing electricity, we've been trading electricity in Europe since more than 20 years, and we have been doing that on a profitable basis. More recently, but it's true that we decided to accelerate our position by acquisition. And what we decided was to acquire leading companies, new companies that were born with what Marie-NoÃ«lle called smart electricity, born in the world of competition. When, in fact, the incumbents that are still dominant in term of market share, it's obviously the case in France, have a very large market share but have difficulty with their legacy assets. So this is why we think that this diversification might be very successful. We have also ascribed to ourselves a reasonable target. We are not foolish. We are not dreaming. We are focusing on Europe and B2C for the time being. We are even focusing on France and Belgium. And when we say we envision a 12%, 15% market share in 5 years, it is only the continuation of the growth of Total's playing in Direct Energy. We are acquiring more or less a bit less than 1 million customers per year.

Having said that, we have this customer base, and of course, we want to integrate Upstream of the need of our customers. It's always the case in Total, in the commodity business, we don't want to be trapped in one narrow part of the chain, so we want to integrate ourself upstream. We want to generate the electricity, part at least of electricity that we are selling to our customers. It is obviously the case for renewables. And one argument we sell electricity today is to sell green electricity. And we are developing solar farm, solar asset. We are -- we have started also to diversify in wind for Total, we have an acquisition, through Direct Energy acquisition. It's natural also for us to complement this renewable position by CCGT, because CCGT are bringing the flexibility that are needed to complement the intermittent renewables. And we are today roughly at 3 gigawatt of capacity, and we intend to be at 10 gigawatt within 5 years, mainly through organic growth of renewable but also maybe through some acquisition.

And last, batteries. Batteries are there. We have started to develop a new range of product in Saft, specializing in energy storage systems. We have already some sale, but we want to grow this business further, and we are preparing the launch of a new range of product that will be even more competitive than the one that Saft is putting on the market. This market is small today, but it is growing very, very fast. It's double-digit growth. If we see the example of this country, our affiliate, SunPower, today is marketing more or less 30% of this solar system, including battery.

Biofuel. So biofuel is also a very important component of our development. As I like to say, biofuel are hydrocarbon's best friends. They are liquid products. They can be blended easily in our product. They can be distributed in our retail network without any change. And on top of that, we are highly strongly supported by many countries around the world. And on top of that, of course, they allow us to decrease the carbon content of our products. So that in history, that we are today the leading European biofuel distributor. We have decided to convert our former oil refinery of La MÃ¨de in a HVO unit that will be the first world-class unit in France.

Biogas is very expensive today, but we can imagine that incorporating some percentage, reasonable percentage of biogas in the natural gas network would make sense one day. We shouldn't exaggerate the ambition beyond that, but there is room to make natural gas even greater. And of course, there is room also for our R&D to prepare the next-generation advanced biofuels, and we are doing that with various R&D program.

Carbon compensation. Marie-NoÃ«lle started, in fact, to disclose part of what we are doing. The critical point that you have to realize is that even if this carbon compensation can see a very long-term issue, and this is clearly a long-term issue for the second half of the century where everybody is speaking at a particular level of a neutral carbon world. But even for the -- or rather, before 2050, if we want to achieve a 2-degree scenario, there is clearly no solution that does not include for a part carbon capture and sequestration. And we think that the oil and gas companies are the ones that have a strong interest to develop this business, to develop the technology. And this is what we are doing today, 10% of our R&D program. We've already made a pilot some years ago in Lacq in South of France. We are investing, as Marie-NoÃ«lle showed you, in Northern Lights, which is a very unlimited project, in Norway. And for OGCI collectively, our industry is investing some $1 billion over 10 years. So we are moving slowly, but we are moving in this direction to be ready for the time this technology will make sense businesswise. And we -- don't forget about the forests. That can be also a cheap way of sequestering carbon. $10 per ton might be possible. So we have started also to step up and to move through Total Foundation. But of course, it will be a very progressive move.

Having said that, having described to you what are the main business trends that we want to develop based on this integration of -- or the climate change consequences on the energy mix. We were willing to build an index that would allow us to measure the carbon intensity of our energy sale. So how did we do that? First, on the left side, we consider all the sales that result from the business plan that have been developed by the different entities for oil, for gas, for electricity. And these are business that have been -- business plan that have been developed on the basis of what we are doing now. Of course, we have tried to extend the horizon all the way up to 2040, so don't ask me too much detail about the ROCE of Momar in 2049. But it's clearly a path in which we strongly believe that we can develop ourself. And what we are measuring are all the emissions that are generated by the sale of these products on the life -- full life cycle basis, which means that we are not only considering in our index the emissions that are released during the production process but also the emission that are released by our customers. Because clearly, 90% of the CO2 emission are released when the hydrocarbon are burned and when they are transformed in CO2.

And so our indicator is at the numerator. We have all this emission, what we call in the jargon Scope 1 plus Scope 2 plus Scope 3. We deduct carbon compensation, carbon sink, what we are using, so it's not a very significant to this horizon, but there is some quantities that are sequestered clearly. And we decide by the amount of energy that we intend to sell to our customers. And after what we show in this chart that Patrick showed you this morning is the trajectory of this index.

And what you see is that with all the business plan that we are developing, we -- and it's not a surprise because we are taking into account taking opportunity of the growth in the low-carbon businesses. And the more we go into the future, the more, in fact, we'll reduce our carbon intensity. And we see that we are reducing by 1% per year this carbon intensity index, so which lead to minus 15% in 2030. Beyond 2030, as Patrick said, of course it's difficult to know exactly what will be the incentive, what will be the regulation that will be promoted by the different government and that will lead us to consider that certain development are not economical. And of course, there is part of this trajectory that cannot be detailed today, but we consider that we should be very comfortable between the minus 25%, which is the extrapolation of the minus 1% that we observe today and for the coming first 15 years. But of course, depending on the different regulation that will be enacted, it could be as low as minus 30% and 35%.

And our product mix at this horizon, as you see, will still be very really biased, very really focused on hydrocarbon. Let me be clear, low-carbon electricity will be a significant part, but it will be only 15% to 20% of our business when gas should be more or less at 50%, 50%-plus. And oil, including the biofuel component that is blended with our products, should be between 30% and 40%. So this is the way we intend to develop and prepare the future of the company: taking once again opportunities that are arising from the climate change in the environment; improving once again our operational efficiency; growing natural gas that would represent more or less 60% of our hydrocarbon production; developing the low-carbon electricity mainly in Europe for the time being at least and the foreseeable future; increasing biofuels because, once again, it's a growing market; and investing in carbon sinks as soon as there will be a business case that will justify to invest in these carbon sinks on an equitable basis.

So this is why -- what we were willing to convey to you, and I hope that you're convinced that this move is, once again, not a major change compared to our appetite to develop our historical business. But we think that, yes, there is room to diversification with the low-carbon business, and this will ensure on the long term the future of the company. Thank you.

==============================
Questions and Answers
------------------------------
Mike Sangster, Total S.A. - Senior Vice-President of IR [1]
------------------------------
Thank you very much, Philippe and Marie-NoÃ«lle. So we'll go into the final Q&A session of the day. I think first question is from Martijn Rats on the left.

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Martijn Rats, Morgan Stanley, Research Division - MD and Head of Oil Research [2]
------------------------------
I had a question about that Exhibit A that you just had up, which is the one that shows the carbon intensity to the trajectory. I wanted to ask you 2 questions about it. First of all, I'm still struggling with these Scope 1, 2, 3 things. Does it relate to Scope 1 and 2? Or this is all related to all 3 scopes? And secondly, I find it quite interesting that you decided to put an actual target of minus 15% to it as there are some of your competitors that talk more about their ambitions or aspirations, showing good intentions to reduce it but not quite willing to put an actual target to it for fear of some legal risk. I'm just wondering what your thoughts were about that.

------------------------------
Philippe Sauquet, Total S.A. - President of Gas, Renewables & Power and President of Strategy-Innovation [3]
------------------------------
I'll answer the first question. The answer is that our index cover everything, so Scope 1, plus 2, plus 3. So once again, the emission that are released by -- as a process of producing this energy and the emission that are released when our customers are burning the fuel. So second question is why put in a...

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Martijn Rats, Morgan Stanley, Research Division - MD and Head of Oil Research [4]
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(inaudible)

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Patrick PouyannÃ©, Total S.A. - Chairman, CEO & President [5]
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Keep it as an ambition...

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Philippe Sauquet, Total S.A. - President of Gas, Renewables & Power and President of Strategy-Innovation [6]
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Targets or objectives.

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Patrick PouyannÃ©, Total S.A. - Chairman, CEO & President [7]
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Ambition, maybe is better than targets. Ambition is a nice word. It doesn't change, okay. It's an Anglo-Saxon. Law is in the U.S....

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Philippe Sauquet, Total S.A. - President of Gas, Renewables & Power and President of Strategy-Innovation [8]
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Law is better.

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Patrick PouyannÃ©, Total S.A. - Chairman, CEO & President [9]
------------------------------
Is better. I think at the end of the day, the question is -- on this one is for companies like us. It's more a serious matter, is will you be under pressure or not from the financial communities and elsewhere? So words are important, are not so important. At the end of the day, it's are we or not, do we have or not to -- can we avoid not to be responsible on these matters? We are convinced that we have to act. Everybody is maybe not convinced but -- so conviction is shared by the Board of Directors. So it's wording to be put on -- just think about ambition.

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Mike Sangster, Total S.A. - Senior Vice-President of IR [10]
------------------------------
Okay, there's a question for Lydia and then from Chris.

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Lydia Rose Emma Rainforth, Barclays Bank PLC, Research Division - Director & Equity Analyst [11]
------------------------------
I have 2 questions. The first one, on the digital side. And the -- on robotic side, you talked about a 20% reduction in the cost base. Is it the robotics part of the digital change that you see as being the biggest absolute impact? Or is that just an example of that coming through? And if you can just check that those -- that 20% reduction isn't included in your cost savings target? And then the second one, just going back into the carbon side. And I know this is a bit of an unfair question, but if -- are you able to give what the sensitivity of cash flow would be to a [$10 per ton move] in the carbon price?

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Mike Sangster, Total S.A. - Senior Vice-President of IR [12]
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Just talk about digital.

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Marie-NoÃ«lle Semeria, Total S.A. - Senior VP & Group CTO [13]
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Okay. So your question is about the part of robotics in the cost reduction. Okay. I discussed with some of you just to explain that robotics or artificial intelligence is part of the solution, even smart rooms. It's just a contribution to the full chain of digital and implementation. So we gave the average number of 20%. In some projects, it's more. In other projects, it's less. But the average is roughly 20%.

------------------------------
Philippe Sauquet, Total S.A. - President of Gas, Renewables & Power and President of Strategy-Innovation [14]
------------------------------
Your second question on the sensitivity of cash flow about the carbon price is not an obvious one because on one side, you could easily compute, but we are more or less emitting some 36 million ton of CO2. So if there is an increase of $10 per ton, you could say, well, it will cost you $500 million per year. In fact, it's much more complex than that because if all our competitors are paying exactly the same price, of course the customer will end up paying the bill. And this is why the answer is not so straightforward.

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Unidentified Analyst [15]
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Philippe, if I may go back to your last slide that you presented, and I just have 2 questions to clarify. First, can you give us some idea what you assume in that 2040 outlook? And I realize it's quite a long time away, but what do you assume in terms of Total's energy sales? How much is it going to grow between now and then? Because surely, and that's the second question, the easiest way -- I'm just checking whether I get this right, the easiest way to meet your carbon ambitions would be to sign lots of offtake agreements with nuclear power plants around the world and sell it to as many customers as you can. Just checking whether I get the mechanics right.

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Philippe Sauquet, Total S.A. - President of Gas, Renewables & Power and President of Strategy-Innovation [16]
------------------------------
Okay. Well, what we've been doing this in fact we have based our reasoning in term of market share. And for instance, in the oil product business, we know what our market share today. We have taken some hypothesis on the size of market all the way until 2040, and we have taken into consideration that we think that we have the potential to increase slightly our market share on this market. But the basis of the reasoning is in term of market share. The same gas, LNG, we have 10% of market share. We have extrapolated the growth in LNG market, and we have supposed that we would have this 10% market share all the way down to -- in the future, 2040. In the low-carbon electricity, there is growth, but we have taken the same kind of hypothesis. 2023, we have told you we ambition to have 15% of B2C market in France plus Belgium. We have supposed that in 2040, we'd have 15% of European market beyond. These are the kind of assumption that we have been taking, and this is leading to the trajectory that you saw. Of course, you could say that's an easy way, yes. You buy nuclear electricity and you sell it and there is 0 emission. We have not taken this kind of trick into consideration, that is true. But as we said, we just intend to have, let's say, between 30% or 50% maximum of integration on power generation. So we know our own mix. But beyond -- we have taken the hypothesis, as it is a European business, that we would be acquiring 50% of the market at [there] based on the mix of the whole of Europe, which is not like in France where it is mainly nuclear. But we took into account the mix, that it's a mix of gas, of renewable, of coal and of nuclear. So we were cautious on that as well.

------------------------------
Mike Sangster, Total S.A. - Senior Vice-President of IR [17]
------------------------------
Yes, Jon. Any questions? I think Jon has a question here as well.

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Jonathon Rigby, UBS Investment Bank, Research Division - MD, Head of Oil Research and Lead Analyst [18]
------------------------------
Sorry to hop on to that last slide, but I just had one question. Given that, I think, you include Scope 3, the -- if I understand it correctly, does that mean you had to put an assumption in for the efficiency at which your gasoline and diesel sales are used? So there's a -- implicitly in that, there's an improvement in the efficiency of internal combustion engines in that?

------------------------------
Philippe Sauquet, Total S.A. - President of Gas, Renewables & Power and President of Strategy-Innovation [19]
------------------------------
The answer is yes.

------------------------------
Jonathon Rigby, UBS Investment Bank, Research Division - MD, Head of Oil Research and Lead Analyst [20]
------------------------------
And then secondly, could you talk a little bit more about where you see the current cost of carbon sequestration, the challenges you're seeing around the technology, what you need to see in terms of sort of breakthrough capabilities and where you think realistically you can take that cost? Because then, I can start to relate that to where the carbon market is as well right now.

------------------------------
Philippe Sauquet, Total S.A. - President of Gas, Renewables & Power and President of Strategy-Innovation [21]
------------------------------
Well, in term of cost, you want to give a figure or -- basically, what we have made in term of studies is leading us to a cost more or less of $100 per ton of CO2 to -- up to $150. The real difficulty is more to find the adequate place where we can store for (inaudible) time the CO2. And this is the real challenge, and this is one reason for us to work with a Norwegian because the North Sea, of course, can offer a potential for the whole of Europe to store CO2. So the question is...

------------------------------
Patrick PouyannÃ©, Total S.A. - Chairman, CEO & President [22]
------------------------------
But all is linked to the...

------------------------------
Philippe Sauquet, Total S.A. - President of Gas, Renewables & Power and President of Strategy-Innovation [23]
------------------------------
Not only cost.

------------------------------
Philippe Sauquet, Total S.A. - President of Gas, Renewables & Power and President of Strategy-Innovation [24]
------------------------------
The carbon pricing. If you are in a world where we'd pay $40 per ton, for a company like Total, it should represent several billions of dollars. I can tell you that if all the industry would face such a situation, we would accelerate investments in these type of technologies. And so it's difficult to anticipate what becomes of it. We need to work on it. We need to be much more proactive. We need some subsidies in order to make this framework working. Then it's a question of scale. But I'm convinced that it's very difficult to extrapolate from supply pilots. You have only 17 projects in the world today, obviously, U.S., 17. It's nothing. So if really we had to store the amounts of CO2, which was in the chart, we see 3 billion tons or even 5 billion tons, motivation will be there and the business will be developed. And I -- that means we can reach $150 per ton or $40 per ton now. But the whole history of technology and incentivization by the [pricing is one] we think that pricing is necessary. It gives me the opportunity to complement or answer to Lydia. In the report that we have on the table, we'll find an interesting data, which is we try to evaluate what was the impact of $40 per ton long term on the portfolio value of Total. It's 5%, 5%, on the NPV. Long-term NPV, $40 per ton. So yes, it's 5%. It's not as dramatic as some people would like to say. So it's 5% on $40 per ton. It's written in the book.

------------------------------
Mike Sangster, Total S.A. - Senior Vice-President of IR [25]
------------------------------
Question on the floor?

------------------------------
Patrick PouyannÃ©, Total S.A. - Chairman, CEO & President [26]
------------------------------
And by the way, this remark -- let me throw one over. You've seen that Philippe mentioned natural things like forests. Obviously, today, when you look to assign, it's much more interesting to invest in natural things than (inaudible) Less than $10. You can be even much more efficient. So we need to think to that before speaking. Yes, I know that we shared these views with other very large European companies, but I think yesterday it rained off-station, but you see, yes, it was put on the table as one thing which would make sense, hopefully for the world, and even in terms of efficiency of dollar we invest.

------------------------------
Mike Sangster, Total S.A. - Senior Vice-President of IR [27]
------------------------------
I think Thomas had a question.

------------------------------
Thomas Yoichi Adolff, CrÃ©dit Suisse AG, Research Division - Head of European Oil & Gas Equity Research and Director [28]
------------------------------
Thomas Adolff from CrÃ©dit Suisse. Just on digital technology. You gave a lot of examples, but you haven't actually quantified the potential savings or extra revenue you can generate from everything you've just mentioned. So I wondered whether it's because it's too early, hard to say, or it's just going to get completed away in the form of low energy costs. And you also mentioned earlier on that you are ahead of your peers in some areas. But being ahead, is that good enough? Or is it actually -- is what you do also differentiated? Because I had this conversation with the CFO of another super major, and he said, "To preserve the margin, you need to do something differentiated." And the second question is, you've talked about less time for data, more time for high-value task. Does that also mean your organization can now be much smaller in terms of headcount?

------------------------------
Marie-NoÃ«lle Semeria, Total S.A. - Senior VP & Group CTO [29]
------------------------------
Okay. So there were many questions in your question. First of all, about the issue to evaluate precisely the cost reduction or the value of implementing a digital strategy, digital technology, I will say that today, we'll -- we start to implement. I gave many example of robots and drones. We are first to develop the hardware, then to demonstrate at the pilot site, then to demonstrate in a real situation, and then to extrapolate the deployment in all our sites. So step-by-step, we are more and more confident in our calculation. So when I gave the average number of 20%, we start to calculate it project by project. So I'm sure that in the next years, we will to be more and more specific, giving right numbers depending on the project. My second comment is that you're right, it's not only a question of our technology, it's also a question of organization or how you dedicate your workforce. So I gave the example of what we are doing with Google, in the partnership with Google. It's clear that we will automize (sic) [automate] all the routine, repetitive task, and we are able to evaluate the free time that we will spend for more complex issue. Today, we know that we have not enough time to exploit all the information that we are buying. So thanks to artificial intelligence, we will give -- we will have access to more data. And so it's not just a question of quantification, it's also a question of learning or, how can I say that, we will learn more because we will have more data. So knowledge will be higher. And so in some cases, we don't know exactly what will be the advantage, but we are sure that there is an advantage because we will know more. In some of the cases, you are asking about is it a good thing to be ahead or not. I will say that regarding digital, there is no risk to be ahead. There is just a risk to create more value. And so we need to be committed, we need to be engaged. It's why we sent people working with Google. It's why we sent people working with Tata in Pune. It's why we have researchers working with Stanford. We need to be at the front to know more about what is occurring and to keep the skills growing inside Total to be able to catch the value and to make the transition in our business. So it's a quite longer...

------------------------------
Patrick PouyannÃ©, Total S.A. - Chairman, CEO & President [30]
------------------------------
Just one. What is the main challenge for us on the cost side is that we need to be able to eliminate more or less the inflation that we face year-over-year. In a commodity business, this is where we are, in fact. And refiners, they know that part of our workforce is because salaries are inflating. But at the end of today, there is no inflation to margins. So all these tools for us that we are trying to develop is new ways to find new efficiencies in order to maintain -- to reach this objective, which is to lower the cost. [It's a mandate]. This is what we are working. So digital clearly is earning. So that's of course part [meaning that you're] digital. On the marketing part, it's more a question of creating value like on this smart electricity story where you can add services. This has potentially like, I would say also, the card fleet management of Momar, this has potentially more -- we will play on the revenues more than on the cost. And this could be some breakthrough. I think the companies, for example, who would be the first to be able to make -- to robotize their service stations could have an edge compared to the others and could attract more customers. So these are more disruptive. They are like what we're trying to do on the smart energy, smart electricity. So to quantify it, to be honest, I read all the papers of my competitors before -- to make that presentation. I've been amazed by the precision of minus 15%, et cetera. We could have put plenty of figures. Maybe we are 2 engineers in Total. So I think Marie already gave you answer. But again, for me, it's more a question of one side to be able to contribute to maintain -- to eliminate the inefficient of the other side is to create added value and added services. We've got the time to come back to you on that. But to be honest, the fact that we are no embarked in this electricity business in a large way, we invested $2.5 billion in this company, we are now speaking about real figures and real market shares and real reserves, and we'll be able to show you that in the coming months and quarters. I think it's the best answer to all of that. Again, last question, please. I don't want -- we don't do that to eliminate workforce in exploration. Clearly, one of the main challenge we have is that we are too slow. We acquire data. And before, to go from data acquisition -- and in this industry, data acquisition and putting it where you have 2 years or something, now that is very long, in fact. And it's a bit worse in -- when you take in reservoir management. In this industry, we make 4D seismic, which means several seismics along the time -- along the life of the reservoir. But to integrate these data that we acquire into a reservoir model, it takes just 1 year to 2 years, so it's too slow, all that. So where I see that we could improve a lot in the industry is to be able to have some algorithm that would help us to update our models and then to be smarter on the way we implement the work. So again, it's a global added value of efficiency there, more than putting -- it's not because we have 200 geology slides that will answer the return for the shareholders. It's not the total target. We are not -- it's not massive, the robotization aspect that the finance industry could face. It is not what we are targeting in our industry. It's not at all. We are not there.

------------------------------
Mike Sangster, Total S.A. - Senior Vice-President of IR [31]
------------------------------
We're conscious time is moving on. Maybe we can have one last question from Jason.

------------------------------
Jason Gammel, Jefferies LLC, Research Division - Equity Analyst [32]
------------------------------
It's Jason Gammel with Jefferies. Just a couple questions on big data actually. As you are partnering with other companies, are you retaining sole ownership of your data, including the metadata? Or is there some sharing of that data with a partner? And then second of all, as more of your data is in places like the cloud, what are you doing about cybersecurity to address the integrity of that data?

------------------------------
Marie-NoÃ«lle Semeria, Total S.A. - Senior VP & Group CTO [33]
------------------------------
I will not detail all the condition of the partnership with Google, but I will say that the guidance of the company apply. It means that each partner keep their background. So regarding Total, the background is in our data. Regarding Google, the background is in the cloud solution and the, I would say, the core algorithm of artificial intelligence. And regarding the way we will learn from our data, we will learn from us. So this will be exploit by Total.

------------------------------
Patrick PouyannÃ©, Total S.A. - Chairman, CEO & President [34]
------------------------------
Cybersecurity is a real concern, to be clear. But these are, at this stage, are bylaws. I mean, our R&D businesses, if we have to do that at a larger scale in a routine way, this industry will be taken into account then. I can tell you what -- we dedicate a decision of the Board of Directors of Total on the cybersecurity risk. So we took that very seriously and including in order of protecting our business interests from -- globally speaking. And it's creating today -- in companies like us, we're obliged to think differently on the way we organize the whole IT and IS systems, in fact, in order to protect the company. And it's more, in particular, to avoid any intrusion of any, I would say, attacks on the common system of refineries and et cetera. It's really of high importance for us in terms of security. So all that is taken into -- but this stage, it's at a stage of R&D development. We can isolate them and it's not yet at a routine level. But this concern of cybersecurity is well taken into account. And I think it applies to all the large cooperations like Total to think again the way we have structured our whole IT system. And when we speak about cloud and things like that, it creates some issues. That's clear.

------------------------------
Mike Sangster, Total S.A. - Senior Vice-President of IR [35]
------------------------------
Okay. I think it's been a very full and busy day. Maybe just before Patrick says a few closing words, I mean, you're all invited to dinner tonight at Monaco's restaurant, which is just down the road. Unfortunately, I believe it's still raining, so there are some umbrellas at reception which you can take with you.

------------------------------
Patrick PouyannÃ©, Total S.A. - Chairman, CEO & President [36]
------------------------------
We are [finished] because the dinner is very important. Otherwise, if you don't come to the dinner, you will miss the best part of the day. So come to the dinner. You have the opportunity to continue to discuss with us.

I would like, first of all, to thank you. We have a -- I think it was the first time we came here to New York, but we had even a larger attendance than in London, to be honest. So I think we'll see if it breaks it if we come to New York. But I think it's good for us that we alternate between London and New York, where we will come back because, again, we have shoulders on both sides of the Atlantic. They are very important to us, and it's good to come as well here.

I would like to thank also all the speakers today. They are behind all that -- a lot of work has been done by them but also by the IR team. And we have to -- you know that we have taken one of you to join the team, [Brendan Wall]. I did not welcome him this morning, but I would like to welcome [Brendan]. Brendan is working with Mike. He had a -- the idea is to transfer the job of Mike to Brendan . There is one condition. He needs to learn French because -- today, it's all it's in English. But before, we speak in French together, which is maybe, by the way, one of the challenge as a company in order to become even more global. But thanks to our Maersk Oil colleagues, everybody is writing in English now, which is a good step.

So thank you to all of you. And again, I hope that you appreciate it. And thank you for your questions. And I think it's good to have this long session because of the -- I remarked and I took some -- few questions of yours which will feed the next presentation of the company. And during the questions, during the workshops or the thematic session, we are more precise, but it helps you probably to go into more details. Don't hesitate, again during the dinner. We are there to try to do our best except some of you also created at what is the value of Arctic 2, what is -- what do we do Hutchinson. So you have some questions, don't ask you -- do not ask us. It has no -- you will see one day. You will see. Don't worry.

Thank you. Thank you to -- for your attendance, and I hope we'll have a good dinner together. Thank you again.

------------------------------
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