Mozambique, Angola and Equatorial Guinea take spotlight at African Energy Week
Transcript : TotalEnergies SE, Q2 2025 Earnings Call, Jul 24, 2025
9:06 CAT | 28 Jul 2025
Image: TotalEnergies
- Highlights in italics show where Mozambique LNG is mentioned.
Operator
Ladies and gentlemen, welcome to Total Energy’s Second Quarter and First Half 2025 Results Conference Call. I now hand over to Patrick Pouyanne, Chairman and CEO; and Jean Pierre Sbraire as CFO, who will lead you through this call. Sir, please go ahead.
Patrick Pouyanné Chairman & CEO
Good afternoon or good morning, everyone. Before Jean-Pierre goes through the details of the second financials, I would like to make some few opening comments. We are facing an unstable geopolitical and macroeconomic environment, which has been dominated by during the quarter by the sale and where the war and also the tariff war between the U.S. and some commercial partners. In this context, all markets have been volatile during the second quarter, with price broadly fluctuating between $60, $70 per barrel, an average of $68 per barrel with a short and ultimately modest increase during the year-end prices with good prices reaching $81 per barrel at the highest point. We could consider in our view that this is quite a limited price response to these major prices.
And somewhere, it is a signal that the whole market is well supplied, in particular, fueled by OPEC+ decision to unwind some voluntary production cuts and also facing a weaker demand linked to the global slowdown of economic growth. In such a context, and Jean-Pierre will detail that in a few moments this quarter. Total Energies once again demonstrating the company’s robustness thanks to its balance and consistent strategy. It’s also thanks, and it’s more important to its differentiated and unique energy production growth profile, both in oil and gas and in electricity and that drives cash flow growth as well as attractive and is the basis for attractive shareholder returns through cycles.
So starting first with our first pillar, Oil and Gas. The first half 2025 production was up more than 3% year-on-year, demonstrating that we are well on track to achieve our 2025 upstream production growth guidance of more than 3% versus ’24 — and as you know, it will be even longer up to the end of the decade, this 3% growth. And it has been supported, and it’s also very important by start-up of high-return projects such as Balimor in the U.S. or Mero in Brazil, which by the way was 1 quarter ahead of schedule. And now the cornea and Closing of schedule. And now [indiscernible] and Clock 3 in Angola just came on stream to further feed the Q3 and H2 growth.
As I said, importantly, this production is coming from this new project is accretive, including the upstream cash flow CFFO per barrel by around $1 per barrel as an average during the quarter, which is, in fact, quite impressive given our large production base. We are also continuing to manage this portfolio focusing on our projects on those, we are mid or low-cost low emission criteria and divesting some noncore higher-cost projects. And during Q2, we consistently with this strategy. We divested non-prorated indirect in non-higher cost projects in Nigeria, Bonga and Brazil, [ GatodoMaito. ] During the second quarter, we have also reloaded the exploration portfolio by acquiring exploration permits in the U.S. in the U.S. Gulf, in Malaysia, in Indonesia and Algeria.
On the LNG front, the big news of the second quarter, but we continue to strengthen the portfolio by signing a 1.5 million tonne LNG offtake element from Rio Grande LNG Train 24. We will become a shareholder of this train as well. And we have also taken, I would say, an option potentially on the future projects located on the Pacific part of Canada, which give access to Asian markets and will benefit, by the way, some very cheap gas in Canada and Alberta, Canada. On the second pillar, as you can have observed, the integrated power continued to deliver solid results and solid cash flows to close to $600 million and is on track to achieve also its annual guidance. In line with our strategy, we also continue to unlock value in our power business by progressing [indiscernible] . We have sold during the quarter, 50% of our 600-megawatt portfolio of renewable assets in Portugal and there is more to come in the second half.
The Downstream results benefited from a positive seasonal effect of marketing and services activities, which have done very well. which in fact are stronger with stronger results year-on-year. Despite near-term improvement in refining margins to be one is a small improvement in the second quarter. Refining chemical chemicals are still facing some headwinds, either on the operational side. refineries. We are not at the optimum, I would say, efficiency done and fourth offer. And also on the market side, it’s more for the polymer business, which is facing overcapacities in the market. Moving to CapEx. During the first half of 2025, net investments totaled $11.6 billion, including $2.2 billion of net acquisitions, in particular, the acquisition of I confirm today that for the full year, we anticipate the net investments will be within the $17 billion, $17.5 billion guidance range given the disposal program planned for the second half of the year, which is already well engaged.
In Netstream, beyond our stake in Bonga, Nigeria, as announced, we have — in fact, this last week, approved some binding offers for our unconventional oil license in Argentina and for 2 other E&P assets, which will represent globally $1 billion of cash flow. We are also working and the E&P team is working hard to close our divestments of onshore Nigeria before year-end. This represents net to $1 billion. In integrated power, we are very well advanced for the farm downs of the 1.5 gigawatt portfolio in the U.S., a 250-megawatt portfolio in France and 400 megawatts in Greece. These 3 farm downs will represent net divestments of CapEx of around $1.5 billion. The gearing stood by the end of June at 18%, increasing quarter-to-quarter, primarily due to net investment being weighted towards the first half of the year, in particular because of the disposal proceeds, but it was anticipated. And working capital more built on first half — sorry, working capital built on the first half.
Excluding the seasonal effects of working capital and the investment base, normalized gearing is 15%. I will conclude my remarks with the shareholder distributions. The message of the Board is clear we maintain shareholder distribution — but high level, I would say, as a payout could stand around 55% in 2025, which is, as you remember, quite above the guidance of more than 40% through cycles. First on dividend. The ordinary dividend is our #1 capital allocation priority. We continue our track record of attractive growth. The Board of Directors approved the segment interim dividend of 2025 or EUR 0.80 per share, which is an increase of 7.6% compared to 24 in and it’s up 25% versus profit. I would like to underline that in U.S. dollar terms, considering the evolution of the U.S. euro exchange rate, this increase of more than 10% and 28% in 23, 8% in ’24. So U.S. shareholders have the benefit of that.
I would like also to [indiscernible] that these dividend yield or dividend yield is the best among the majors were comforted by the ability of the company to reach its 2025 underlying growth objectives, in particular, on energy production on both sides, the upstream, which continued to deliver good results quarter after quarter and also integrated power while maintaining a strong balance sheet, the normalized gearing at 15%. The Board has decided to continue share buybacks for up to $2 billion in the third quarter. The Board will continue to monitor the buyback on a quarterly basis, looking to the evolution of the macro environment but also on possible anticipations on the oil gas refining petrochemical markets.
We intend to give you more colors on the buyback scheme investment at our Investor Day end of September. And now I will turn the call over to Jean-Pierre, who will go through the details of second quarter financials.
Jean-Pierre Sbraire CFO
Thank you, Patrick. So I will start by commenting on the price environment in the second quarter, which was overall weaker quarter-over-quarter. [indiscernible] averaged $68 per barrel versus $76 per barrel in the first quarter, so down 10%. TTF, the European gas market averaged $11.9 per million MU versus $14.4 per million MU in the Q1, down 18%. And the average LNG price also decreased to $9.10 per million BTU versus $10 per million BTU in the first quarter, down again by 10%. For refining, the ERM, refining margin slightly improved to $135 per ton during the second quarter, but as mentioned by Patrick, still remains at low level. In this context, the company reported robust financial results, demonstrating the strength of our business model and our operations with adjusted net income of $3.6 billion and cash flow from operations of $6.6 billion for the second quarter, which were supported by accretive production growth.
Profitability remained strong with return on equity for the 12 months ending June at 14.1%. Now moving to the business segments, starting with hydrocarbons. As anticipated, second quarter production was slightly lower than the first quarter due to planned maintenance. However, on a year-over-year basis, the second quarter marked yet another increase in upstream production, which amounted to a strong 2.5%, thanks to new projects start-up and ramp-ups. On the cost side, the company continues to be a leading low-cost operator with upstream operating costs at $4.9 per barrel for the first half of the year. Looking forward, we expect hydrocarbon production in the third quarter to increase by more than 3% compared to the third quarter ’24.
Turning now to Exploration and Production. So this segment generated second quarter ’25 adjusted net operating income of $2 billion and a cash flow of $3.8 billion. Importantly, our project queue is delivering new low-cost, low-emission oil and gas that is accretive with an average upstream CFFO per barrel equivalent that is roughly 2x the base portfolio. In fact, during the second quarter, production from the new projects improved the upstream CFFO per barrel equivalent by around $1 per barrel equivalent, generating something like $180 million more than if they had come from the base portfolio. On a cumulative basis for the first half ’25, the extra CFFO generated by new projects totaled close to $300 million.
On integrated LNG business, our sales were stable at 10.6 million tons for the second quarter, and the company achieved $1 million of adjusted net operating income and cash flow of $1.2 million for the second quarter, reflecting the 10% increase in the average LNG selling price related to declining crude price as well as low market volatility for gas trading activities. Forward, European gas prices continue to be sustained at around $12 per millMetu for the third quarter and for ’25-’26 winter period due to storage replenishment in Europe. Given the evolution of oil and gas prices in the recent months and the lag effect on pricing terminals, the company anticipates an average LNG selling price of $9 to $9.5 per mill in the third quarter. Integrated Power, the net power generation increased 28% year-on-year to 11.6 terawatt hour due to growth in renewable sources and the impact of the 1.3 gigawatt CCGT acquisition in the U.K. closed in ’24.
Integrated Power adjusted net operating income was close to $580 million, up 14% year-on-year and cash flow was $562 million. First half ’25 cash flow totaled $1.2 billion, and we’re on track to achieve the annual cash flow guidance. Lastly, we are progressing on the company’s farm-down strategy, which optimized, as you know, capital allocation. During the second quarter, the company sold 50% of a $600 million portfolio of renewable assets in Portugal. And as Patrick mentioned, there is more to come with the 50% farm down of a 1.5 gigawatt portfolio in the U.S., 400 megawatts in Greece and 250 megawatts in France.
Moving now to Downstream. Although refining margin improved during the second quarter to $35 per ton, overall, we remain in a global weak price environment. In this context, Downstream reported second quarter adjusted net operating income of $0.8 billion and cash flow of $1.5 billion. Results benefited from positive seasonality in Marketing and Services business with results higher year-on-year. In refining, the utilization rate increased in the second quarter due to improved efficiency and low maintenance, but the results suffered from some operational difficulties at Power and those refineries as well as weak petrochemical margins as the polymers business is facing a global glut of new capacity in China and in the U.S.
Looking ahead, we anticipate refining utilization in the range of 80% to 85% in the third quarter ’25, which reflects scheduled maintenance at Hre,oratur and Ash in Korea. In terms of downstream environment, in petrochemicals, we see continued pressure on pricing from the record incremental production capacity that was placed in operation in ’22 and ’23. And in SAF business, imports to Europe has significantly increased, pushing prices down and likely impacting bio margin for the rest of the year. Moving now to the company level. On working cap, the company reported a $0.5 billion increase in working cap requirements, mainly due to the unfavorable effect of declining prices on tax liabilities and payments during the quarter of the capital gainact from divesting the German distribution networks to [indiscernible] .
This was partially offset by the seasonal release on gas and electricity supply activities in Europe after a strong build in the first quarter. Note that the increase in the first half ’25 working cap requirements of $4.9 billion is essentially at the same level that was reported 1 year ago in the first half ’24. Looking ahead, the company expects that most of the seasonal working cap build that was observed in the first quarter of ’25 should be released in the second half of the year. On net investment side, so net investment totaled $6.6 billion in the second quarter, which notably included the closing of the GLB acquisition for $1.6 billion and $11.6 billion for the first half of the year.
We anticipate full year net investments to be within the guidance range based on planned disposal during the second quarter half of the year, as Patrick mentioned. That means that the gearing by end of June is impacted by something like $2.6 billion, $2.8 billion CapEx. With that, Patrick and I are now available to answer to your questions. And now we can open the line. Thank you.
Operator
[Operator Instructions]
The first question is from Michele Della Vigna, Goldman Sachs.
Michele Della Vigna Goldman Sachs Group, Inc.
Two quick questions on the LNG market actually. You continue to grow it very strongly with both long-term contracts and new projects. I’m just wondering, at what point do you think that it will become really difficult to sign new long-term supply contracts with customers. It feels like we are starting to build a bit of an oversupply for the coming years and the oil linkage is probably approaching that 12%, which starts to become less attractive.
Just want your view there also because it would be interesting to see at what point we start to see a slowdown in new FIDs. And then related to that, in the U.S. how do tariffs impact the cost of building new LNG plants there, there’s various elements. I think the still cars probably the most relevant ones. And does that make you be more cautious to do an FID on a new LNG project in the U.S. or that’s actually manageable in the context of your portfolio?
Patrick Pouyanné Chairman & CEO
Thank you, Michele. You are right. There is clearly a big, an increase of LNG supply, which will come on stream, as we said, ’27, ’28, ’29. For me, ’26 still will be quiet because these projects are always a little difficult to ramp up, I would say. So project in Qatar is more or less on time. The first range we expect from NFEs mid-26 than every 6 months a new train. So ’26 for me will not be so much impacted by this new capacity. From ’27, you will see clearly an impact. That’s why we — since last year, we decided to move to a clear strategy, which is to sign some medium, long-term contract linked to brand because I’m more optimistic on the new brand oil price on the, I would say, spot gas price.
So — and we continue to have some success on that. We have announced this year, quite a number of million tonnes with last year and will continue. The question is why the customers behave like that? I think the customer, they have been, I think, honestly code in ’22 by some [indiscernible] hike. We are in a world which is honestly quite volatile, the geopolitics player game in the market more than ever. It’s not just supply and demand. That’s, by the way, not easy for traders to manage geopolitical risk, even if I would say all traders within TotalEnergies have done very well in the second quarter. despite this environment. So that’s true.
But I think the buyers continue to look at it as a way to hedge themselves. They want to yes, it’s true it’s better to sign at 13%, but at 12% actually with you. But by the way, when you have a long-term contract at the end for a company like TotalEnergies, it’s not only a percentage, which can it’s also all the optionalities because we have a large portfolio, and then we can — do you have the capacity to redirect the cargoes to [indiscernible] a lot of things which are also important for us. So around the medium long-term contract, there is more value to extract than just a pure formula. That’s why it’s important to be a portfolio company. And I think, in fact, in one of the advantage of the position of TotalEnergies is when we meet these buyers, they see us as a portfolio company. And not just as a point to point, I would say, seller and buyer.
It’s not project on — but we are today marketing PNG at LNG, sorry, marketing — and we have some good results in some Asian countries because of the location. So these dynamics still there, and we continue to work on that. USA, I have some good news for you to because we have here a figure. We know we are just — we are not far from approving sanctioning, but not us rebrand next decade. It’s not far from sanctioning the ’24 maybe ’25. So there have been some, I would say, EPC contract discussed with Bechtel. And I will tell you, Mike, I was a little afraid and where do we land with this tariff impact.
Finally, we — of course, there is some inflation, but it’s less than 10%, I would say. So it’s very reasonable. And so for me, again, an exit wants also to commercialize is LNG. So it’s more a question of marketing I think ’24 is full, ’25 is not yet, but things are moving on, and it’s their job — but — and fundamentally, from this real case, I would say, that we manage. And I think it’s also the dynamic when you have a very good EPC contractor. We see some advantage. I think Rio Grande LNG is a success [indiscernible] , 3, 2, 3. If we are able to continue on plan 4 and 25, then there is also some synergies there.
So your answer to you, I would say, on this specific case, we are comfortable. We don’t see much impact on the tariff. We will see more impact on the tariff, I think, on topics like batteries because batteries, you have to import most of the sales in the world are manufactured in China. So even if you build the modules in the U.S., you have to import sales. So this type of business might — will be more impacted. But from this perspective, I think my colleagues who are drilling U.S. shale oil are probably more impacted by the increase of tariff on the steel because I understand they are using some specific steel. Most of this it is impacted. So probably the cost of the well in U.S. shale is more impacted in our own business in the U.S. today.
Operator
The next question is from Biraj Borkhataria, RBC.
Biraj Borkhataria RBC Capital Markets
The first one, just on working capital. And if I look at the quarterly changes in working capital over the last few years, it looks like the magnitude is both up and down on a quarterly basis as been field looks like it increasing over the last few years. And I’m thinking about the period sort of 2017, ’18 to now.
Just trying to understand if that’s something we should expect going forward, whether it’s the growth of the power business or something else? Or is there any particular reason for that? And the second question is just on — a quick one on the buyback in Q1, you said up to EUR 2 billion buyback. I noted you did $1.7 million this quarter. Was that just a timing issue or liquidity or a conscious decision to do a bit less sales? Anything — any color on that would be helpful.
Patrick Pouyanné Chairman & CEO
Second question, it’s easy. You have find the right reason. It’s more a question of timing. We have — the $2 billion have been bought by 13th of July. It was a question of liquidity. So no message for the $1.7 billion, we will catch up according to the guidance of the Board, okay? So we are working on it. But that’s easy to answer the second question, it will give you insurance on that.
On the first one, the quarterly, look, I think Jean-Pierre told you, made a remark. If I’m looking to — at the end of the first half of ’24, first half of ’25, we had both years build of around $5 billion. In ’23, it was around $4 billion or $3.5 billion. So there is an increase because we are — the more we develop this B2C business in Gas and Power, which is growing in the company, the more we have a seasonal effect, which is that, in fact, the people are using, I mean somewhere are burning a lot of using electricity — consume — sorry, consume electricity and gas during winter times. And as they are bill is spread about 12 months, we have a working capital effect, which is we catch up, but that’s increasing a little.
Having said that, just to be clear with you, last year, at the end of the last year, we told you in our working capital gearing went down to $7 billion. We made a modification. We told you be careful. There is an exceptional, I would say, positive element of around $1.5 billion. So for me, what I’m expecting between today and the end of the year is a $5 billion build of the first half should be, in fact, erased by $3.5 billion, I would say. If I don’t have any other exceptional, normally, we should — like we’ve done in the previous years, Jean-Pierre has explained — has shown as a nice graph in front of us. Maybe one day, we’ll share it with you, which demonstrate the seasonality.
So — and we, of course, presented that to the Board, and we are comfortable with the type of metrics I just gave you to give you more insights of what happened. And so that’s also why, to be honest, when we put together to the Board, and I’m just repeating what I said, this working capital analysis plus this, I would say, CapEx, which have been more weighted on the first half because of the disposal. And because as I try to — I mean, I hope you convince, I gave you a list of all the disposals, which we are committed to and which we are really binding offers on which we are now translating that in SPA, the Board considers that all these elements given confidence to maintain this buyback at $2 billion.
Knowing that as an average for the year, we are at $70 per barrel like, by the way, we’ve made a presentation in February at $70 per barrel, giving you some guidance. And so the $70 per barrel has been the average for the year. Today, when I’m looking to I’m at $70. And there are people can say low bearish on demand supply. But at the end of the day, this is a market, and so we keep trust on that.
Operator
The next question is from Irene Himona Bernstein.
Irene Himona Sanford C. Bernstein & Co.
Patrick, you told us before that the $2 billion quarterly share buyback is affordable at $70 and at reasonable market conditions. When you look at the balance sheet with the current 15% normalized gearing, what is the normalized gearing range, let’s say, that you would see is reasonable. In other words, how high would that normalized gearing have to go to remain acceptable in a $70 environment.
And then my second question on integrated gas and LNG. The CFFO in the division declined about 6% in the first half year-on-year. Are you confident in the cash flow guidance you provided for that division out to 2028?
Patrick Pouyanné Chairman & CEO
To be clear. At $70, we told you at the beginning of the year, but the target guidance for the gearing was around 12%, 14%, if I remember well. There were some few assumptions in it. So in particular, there was the idea that the downstream could target a cash of $7 billion. to be honest today, we do 2.5 in the first year. We are — we think the net will improve because the margins — first quarter margins on refining have always better as is the case. We have margins today above $60 — $60 per ton. It’s good.
Second, I’m really confident that the performance of the 2 assets have mentioned will improve. — teams are working. So I would say maybe not 7 months maybe 6, but we are not so far. So I’m on — on the — you have some — so I would say, for me, at the end, we are still targeting 14%, 15% gearing by the end of the year. So the normalized gearing for [indiscernible] is a good guidance. And the Board is comfortable with 15% at $7. This is a message I think we’ve delivered to you. So again, it’s not only the gearing that we know that the volatility is more we observe the market.
And today, as I said, and there are some pros, some counts. We not only look to the oil markets. The gas markets, I would say, we are quite confident for next year. But also the petrochemical markets, the downstream market. There are some good reasons to think that the diesel spread is quite strong in particular with all what happens around Russia. So it’s a good approach that we take — but let’s say, at $70, 15%, we are comfortable to maintain this buyback level. Then the second question, and I understand your question, why? But I mean, we will, of course, give you more information by end of September, September investor meeting — we come back traditionally with the data of our 5-year business plan.
So we’ll, of course, update you on both room for upstream, the LNG part as well. I can tell you that I think last year, we gave you some guidance which were something like $6 billion or $60, $7.5 billion or $80 and the figures that I’ve read recently for more preyear business plans are confirming this guidance. So we will — we’ll give more color by the end of September, but I’m confident we can do that. Honestly, the small miss that I observe as well, to be clear, it’s not so big. It’s linked to — in the gas, in fact, there is, in fact, gas markets are well in Europe, but we are quite — we have no volatility. We’ve seen quite a good volatility in the oil price. — moving from $60 to $70, then $81, and operators were already able to capture that during the second quarter.
So congratulations to them. On the gas — when you look to the gas crush in Europe, TTF, I think, was moving from 11% to 12%, maybe a little 12.5%. So there was little volatility. And by the way, again, it’s true. I see some comments from one of our peers. But in this type of market where sometimes we are — it’s not only supply and demand, it’s more political impacts. Traders are a little more cautious not to take direct directional position, which could be it by with. So it’s a little more difficult for them analyze the market beyond the fundamentals, which is our job normally fundamentals to. That’s the point. So no, there will be no change in the guidance.
Our LNG business will grow. We will deliver the growth from Qatar, from the U.S., and it will positively impact the CFFO.
Operator
The next question is from Martin Rats of Morgan Stanley.
Martijn Rats Morgan Stanley
Yes, I wanted to ask you, too. First, if I can pick you up on the point on refining, because of course, I read your outlook statement, which looks quite cautious on the outlook for refining, talking about long-term structural challenges. But we have really quite encouraging refining margin on the screen.
As of today, over the last couple of weeks, there’s a lot of strength in middle distillate. So reading out those statements what sort of was shining through as a clear belief. I think that this is sort of temporary. And I was wondering if you could say a few words about — in your mind, what is explaining this recent [indiscernible] of strengths, but also how long this could last and how it could dissipate. We’re closing a lot of refineries in Europe this year. So I kind of thought that the remaining refineries of Total, at least in Europe, actually should have quite a decent 2026 as well, but I was hoping you could give a few thoughts on that.
And also, I wanted to ask if you could give us an update on Mozambique and the project there and what we can expect going forward.
Patrick Pouyanné Chairman & CEO
Refining, it’s an interesting question. I think, in particular, what is clearly today happened is that there is a diesel driver in the market. to explain why refining margins are quite good. And we think that stronger diesel prices become a persistent feature on the global market. It’s linked in particular to all what happened around Russia flows. In fact, the Europeans have banned have stopped buying Russian petroleum products in ’23 and that means that the source of diesel because Europe is fundamentally the deficit of diesel, we are obliged to import.
So for diesels are coming now from Middle East or for U.S. refineries further away. So it has increased the cost of all that. I would say the last decision of the European Union, which is to ban imports from refineries even outside of Russia, and targeting some refineries offering in India or Turkey which would use in color to be refined to make diesel is impacting again, I would say, increasing the — the scarcity of source of diesel for Europe. So it’s an additional signal, which go in the same direction.
On diesel as well, as you have observed, desal is easier to produce from heavier crude oil and light crude oil. And in fact, the mix of the crude oil, the basket is lighter and lighter because share. fee. So in fact, that means that it’s more difficult, more personally to produce [indiscernible] . So that’s another source which is, again, I would say, and we have also more NGL in the — when we speak about liquids. NGL was like all of the is not good for making diesel, but is, again, pushing diesel prices up — and I think that’s the fundamentals that I try to analyze the diesel fundamentals which are supporting this market — in Q3, of course, it’s the driving season, so there is more demand.
But I think the news coming — people have very estimated this news from the EU banning imports of products from non-Russian refineries, if they use Russian crude oil, but of course, it’s pushing up. So bar something for me more structural. Then it’s a margin business. It’s not like oil, but this is important One —
On Mozambique, Abeta, we are working — as you know, it’s a major project. And I would say we are working in order to ensure a very strong alignment between the government of Mozambique and the investors and this is, for me, absolutely necessary before we engage to have a very strong alignment between the Mozambican authorities and the investors.
Operator
Next question is from Lydia Rainforth, Barclays.
Lydia Rainforth Barclays Bank
Two questions, if I could. Firstly, just picking up on the downstream and the structural side. Can you talk about the potential you see from that the digital AI deployment that you announced, I think, with Emerson and how quickly do you start to see results on that? And then secondly, if I can come back to the buyback. I mean I get the idea that the rest looks covered by divestments, that gearing doesn’t go work, but you can afford the $2 billion for the quarter. But as we — you did talk about the payout ratio being high at 55%.
So I’m just thinking about as we go into sort of next year, how you’re thinking about that why you want to stick to that $2 billion buyback? Is it just because you’re seeing the value in the share price just really why you’re still saying that’s the right level.
Patrick Pouyanné Chairman & CEO
First question, thank you for the question of AI and digital. We are now moving going, I would say, from words to action. And this is — these announcements with Emerson that digital is quite fundamental. In fact, we have decided to invest in, I would say, a real-time data platform. We need to structure all this data. It will be done not on a pilot basis, but on a worldwide basis. For all our assets, in Downstream refineries also in Upstream. So the same platform, which is the intimation platform, which behind the platform, we are developing with MSM, some software, which the objective is to I would say, in term of value we can extract from the assets. And there are 2 programs.
One on advanced process control and upstream, advanced process control is technologies, which are used in refineries for long, which were not used in the upstream. So we reuse them on our upstream assets. And we think since my upstreamers have discovered it, they are fun of that. So this is a mote. And we are also working on the downstream to going beyond advanced control in order to make more developments on software based on data with — so it is really for us, and I’m a believer that AI is not only cutting costs that I would say, general services. It’s enhancing the value of the asset because we could better monitor these machines. So this is a rule of purpose, no for TotalEnergies, it’s action. And we are also, by the way, working with another company, and there will be an announcement soon to another additional AI platform, which will come on assets. So that’s good because digital for me, it’s really the source of future competitiveness in our operations.
We are also establishing, by the way, within OneTech, a full digital line in order to — it’s not a question of IT people. It’s a matter of business people to put it at the heart of the technology of the assets and the digital line will be established within OneTech with strong teams. So that’s for this one. On the second one, when we think about buyback, firstly, why do we buy back just a fundamental. It’s just a matter also of good management of the money of Jean-Pierre. When I observed is that today, Jean-Pierre has been able with his teams to make a bond issuance in euro recently again at around 3.5%. So we borrow money at debt is at 3.5%. At the same time, but I hope it will not be for long, but considering the share of value share, we serve the cost of the capital, if I say, the dividend over the share value is around 6%.
So why do I buy — make buyback? It’s not because it’s just — you can demonstrate to anybody that I’m saving some money from one side, and I’m borrowing at a lower side. But the fundamental, there is no — and on the top of it, when you buy back, — as I said, it’s a base of increasing future dividend. So it’s a virtuous circle. So there are the 2 fundamental reasons. Then the question, we benefit from a strong balance sheet. In the past, it was a 30%, 40% gearing. Today, people have questions because we move from 10% to 15%, okay? I’m a little bit clear. We should look at it and I see titles in newspapers when I’m a little surprised as if it’s problematic.
No. I think we need to monitor that. For me, again, there is a point. I answered to a question what is reasonable? I say I think I said 65%, 70% is reasonable. That means that at a certain point beyond 60%, 65%, maybe not reasonable. But we’ll see that. And I will come back to you because I know that unfortunately, we will give guidance to all of you who want always more color on it. So the reasonable guidance is maybe not enough for you. So end of September, we are working with the Board. We’ll come with you with, I would say, a more not fully detailed. We like to keep some capacity to maneuver, but we’ll give you — answering your question, in particular, because we are at $70, we are more $80. Some people in the market look to $60. So I think it will be time to come back with you with a clearer picture.
Today, we stick to what we said. We have $70 for the first half, $70 on the market and the $70, we committed to $2 billion at the beginning of the year. And even if we have a little lower cash flow from the downstream, it does not change dramatically. It’s not missing $1 billion miss will not change the full picture like that.
Operator
Next question is from Doug Leggate of Wolfe Research.
Doug Leggate
Patrick, I think the working capital discussion has been fairly well very far well debated. But I’m wondering about the CapEx guide for the year. You’re running pretty hot, obviously, with the acquisitions year-to-date. — versus the $17 billion to $7.5 billion guide. What visibility can you give us on disposals to get you back into that range in the second half of the year?
Patrick Pouyanné Chairman & CEO
Okay. Chris, look, sorry, I think I gave you in my speech, I tried to give you a lot of visibility more than ever I’ve done, I think. So I think it’s the first time because I knew that you will have to be secured with that because you — but generally, I have — when I say something, we execute it. I know it’s a matter of credibility. But what I told you is that we had already [indiscernible] , which has been divested. I told you that we have approved of the Executive Committee taken some binding offers from other assets, in particular, our unconventional oil license in Argentina with a good offer and 2 other assets that I cannot disclose because it’s not yet public, but it will come. So it represent $1 billion.
We have another $1 billion coming from closing the onshore Nigeria divestments, which was announced last year in Nigeria is always longer, but we are working on it. And then, of course, we have all the farm-downs on the integrated power, which will represent $1.5 billion. So when you make the math, $1 plus $1 billion plus $1.5 billion, $3.5 billion. So — and it’s more or less — the guidance of the year for CapEx was a net between acquisition and divestments of 0, which is what I told you at the beginning of the year.
And on the — I would say, organic CapEx, we are in line. To be honest, I have signed even a small challenge to my team telling them that 17%, 17.5% is within the range. It would be better to be next to 17% than next to 17.5%. It’s a challenge. I’m not sure that we will manage, but we are working on that.
Doug Leggate
It’s early here. I guess I missed the details. Sorry, Patrick, but thank you for…
Patrick Pouyanné Chairman & CEO
Sorry I give you — again, you should benefit of it because I’m not sure we’ll do it again to give more visibility.
Doug Leggate
My follow-up is a little detailed. You bought — or you took the 25% of [indiscernible] block or share in Block 53 in Suriname. And our understanding is that from one of your — basically your FPSO providers that things may be moving a bit faster there. Can you offer any insight on the timing, the latest thoughts on [indiscernible]? And what Block 53 means for the resource recovery and perhaps the part production?
Patrick Pouyanné Chairman & CEO
I mean on Gran Morgu, honestly, I don’t know who is telling you they are moving faster. I would be very happy if we deliver the first oil by beginning first half ’28 that we committed. No, I think they are moving. I recently went to KL to Kuala Lumpur, where I met my teams. There was good news and some a little more cautious news. So I need to take all that.
Now honestly, we are — there is no reason to change, no reason to accelerate. But then Block 53, there was a small discovery there. I mean, we’re in the range of 50 million barrels. So we had the opportunity to capture it for quite a decent amount, quite very reasonable ones. [indiscernible] wants to exit from a trim. So we were the obvious buyers. So it’s — we’ll connect it. We have, I think we have — the plateau of Gran Morgu is at 220,000 barrels per day. This machine generally, when we were designing them for 220,000, they can easily go up to 240,000. It’s not 10% is generally the case. So if we can connect these type of things, it will give more value.
But for me, as I always told you since we sanctioned with Gran Morgu, Gran Morgu, there is a lot of hydrocarbons, including around — we made other discoveries that we put behind. So there will be a planning. We are discussing — we are trying to look to come back on some and to appraise some of the previous discoveries. So I’ve asked my teams because the — even if there’s maybe not enough to make a second FPSO.
But for sure, the objective is to have to extend the plateau and to make a higher plateau to create a lot of value from this infrastructure. So it was a very good opportunity for us to make things. And being inside will smooth all these type of unitization stories and be a partner of it will help a lot with our colleagues to — in order to move this resource quicker.
Operator
The next question is from Christopher Kuplent, Bank of America.
Christopher Kuplent BofA Securities
Just 2 quick ones, please. On FX. Can I ask your dividend has become almost 10% more expensive since the start of the year in dollar terms. Is that still irrelevant in the greater scheme of things, Patrick, as you said, $1 billion in Downstream here or there, 10% of the dividend is less than $1 billion? How does that inform your take on the overall payout? And secondly, if I may, has the arbitration outcome between the Exxon has changed anything the way you are thinking about rights of first refusals in contracts?
Patrick Pouyanné Chairman & CEO
The question is easy. No. Because I think, clearly, I would say, by the way, I don’t like Genovari too much the right of first of usual or hydro preemption because generally, when you give us in a contract, you lower the value of the assets because, of course, so it’s more complex to monetize an asset when there is this type of right of redemption or right of actual right, of course, the fuel by the way, for me, has never been clear. right of ppt, I understand what they have to do, it operator. You have with the debate. You are asking for something, but what is right to say no. I mean it’s always a source of confusion. I think the outcome is good for the industry because this type of clause exists in many GOA standard IP and close.
And it would have been quite a problem if suddenly, we had to review all these close in the ad. So I’m comfortable with the outcome. I don’t have all the details to be honest of the growth itself. But that for me, we are thinking. I prefer, honestly, right of preemption, if you have to accept an for always a little difficult to manage. On the FX, no, I think, I mean, I’m posting on the control of [indiscernible] . It’s not — there is no real impact on ’25 because in fact ’25. First, we make quarterly dividend. So the advantage is that most of the dividend at the beginning of the year where we’re even lower. I think one of them was lower than 1.
On the average of the year, there will be a very limited impact, maybe $200 million or something like that. So it’s not sizable. There is a [indiscernible] — the question is more relevant. And that’s part of when I say the macro environment for the Board, there is also this question of U.S. to euro exchange rate. We designed, I would say, $7 when we say, in fact, the return to shareholders, you could translate it by $16 billion to of dividend plus state of buyback. $70. We are considering that it was a high return, but digital, we could support.
Of course, if we engage and we have not yet enough I would say, background of the dollar-euro exchange rate. But if we consider the macro is going from 1.1 million to 1.2 million then the $16 billion would be done in another way. And by the way, the Board will think about it. If we have to spend 10% more on the dividend, the ’26 then we’ll have to adapt. Take in mind — keep in mind that it’s a $16 billion in that case. But it’s too uncertain today. Again, I’ve seen the dollar euro rate moving down to 1.06 at the beginning of the year. And today, it’s 1.16. So before to overreact, we are waiting to see what we’ll do beta and we’ll have more clarity with quarter to come.
But yes, it will be taken into account. It is the Board consider that we are entering into a more systemic, I would say, 1.2 euro-dollar rate, then $16 billion could be done in another way, knowing that the dividend is always a priority for the Board.
Operator
Next question is from Matt Lofting at JPMorgan.
Matthew Lofting JPMorgan Chase & Co
I wanted to just come back on the earlier comments on gearing and the balance sheet. If I understood right, I think you were saying this 12% to 13% gearing year-end to $70 from February is now more in the range of $14 to $15. It sounded like downstream cash flow at around $1 billion is a part of that, but I guess the margin assumptions the 35 looks okay versus where we sit today. So could you just add a bit more color around sort of where the delta is there on gearing and perhaps within the downstream piece, the sources of those moving parts, but perhaps more through asset performance than margin?
Patrick Pouyanné Chairman & CEO
Yes, but I’ve been clear. I — honestly, there is a miss on the first half. I will not on the downstream part and partly is linked to the performance in particular of 2 assets that I mentioned in the second quarter. The bad performance of, I would say, Port Arthur and [indiscernible] costed us almost $200 million. There is another element — 2 other elements in the downstream today. One is the biofuels market in Europe. There is an oversupply today in Europe.
On the biofuel market, the famous SAF market today. Europe and airline companies are so afraid there is a miss, but Europe is imposing from all over the planet, and it has crushed the margin. There is little difference today between the biodiesel and the diesel margin. So it has spread again. So that’s not — that’s a low signal. And then petrochemicals. And honestly, on the polymer side, we did not comment that too much, but there are several quarters where we suffer from it, in fact. And it’s not only Europe, it’s also Korea. It’s more — in fact, today, you have — and we have to think about it. There was a lot of capacities put on stream in the U.S., plenty of crackers.
Not because of the domestic market, but for export markets, exporting to South America or to China. But in the meantime, at the same time, Chinese have built a lot of petrochemical capacities, which, by the way, are supplied by NGLs coming from the U.S. So it’s a little funny all that. But this created — in fact, the Chinese have followed a policy of almost self-supplying in petrochemical. They have tried to secure — they are obsessed by this idea of security of sovereign economic sovereignty, economic security. And so today, in fact, when you look, even the Chinese are complaining, by the way, because most of their petrochemicals are on naphtha, and they are complaining.
I met the Chairman of Sinopec. I tell him yes, but you are a little — yes, you are. But so you have a lot of polymers, U.S., Middle East, China. And that today, this — in a global macro, which is not so good, you have a global slowdown and industrial activity in China is not as strong as it was before. And so this is clearly on polymers, there is an impact. And I’m not surprised to see today, by the way, it’s good news, but we have just announced we shut down one of our cracker in A, but other crackers have been shut down. In fact, last year in France and so crackers shutting down. So of course, these industrial tools in Europe begins to face the overcapacities that we have. We are obliged now to streamline.
And so it will take time when we enter into a low cycle because it’s again, you have to take strong decisions to shut down a plant. So that’s the point. So that’s also why today, we had, I would say, first quarter — first half of the year, we had a miss of around $400 million, $400 million globally, which I think we can reverse on the second half, not on the petrochemicals, but my refining margins, as I said, are better, diesel driving season. So $6 billion might be there.
Operator
The next question is from Lucas Herrmann, BMP.
Lucas Herrmann BNP Paribas Exane
Two, if I might, one was just a follow-on. Patrick, just going back to Mozambique, you talked about trying to ensure alignment between yourself and the government. I wonder whether you can make any comments on where the misalignment lies.
And secondly, staying with chemicals. I’m sorry, it’s an asset-specific question or a business-specific question. But just wondered how that asset has been performing and how you — and to what extent you feel that, that business continues to lie early within Total’s portfolio, given the way that you’ve been pushing and directing the business?
Patrick Pouyanné Chairman & CEO
No. Mozambique, I think I made comments. So there is no — don’t misunderstand it negatively what I said. I made a positive comment, which is to start — to restart the project, we need a strong alignment, and we are working on a strong alignment. So don’t try to interpret my words. It’s just that we are working on it. We speak about large projects, $20 billion. So we need to be sure. And again, we have been obliged to stop to restart. I need to have all the strong alignment between parties, security, everything, I would say it’s important. And we are working on it.
And again, summer, I said summer, so summer ends September 19. So give me time.
Chemicals, no, I mean, again, I think in the chemical business, we have some strong assets which, I would say, are the ones which are fundamentally on feedstock, feedstock and the ones which are historically on naphtha, which are not so competitive. Most of the European assets are on naphtha. And you have — and the domestic market in Europe is not growing for polymers. It’s more — the global — there is no big growth in Europe, and that’s the point. So by the way, should it stay within TTE portfolio, there is an integration between refining and crackers, which works. It works if we have an integrated platform.
But why did we stop decided to shut down one cracker in [indiscernible] ? It was not integrated at all in our portfolio. We had a cracker and all the ethylene was, in fact, sold to ExxonMobil, which was making polymers. ExxonMobil decided to shut down their own polymer plant. So no more integration. I will not keep alive and running a cracker with ethylene with no outcome. So integration is key. It’s another demonstration. It’s true on the chain. So if we have the — as long as we have some integration, it works, then it’s better to make, again, to produce the type of polymers in Saudi Arabia or in Qatar with cheap feedstock than with naphtha, which is more expensive in Europe.
So by the way, maybe you have an idea to whom I could divest, but I’m afraid that you never make a good business when you sell at a low cycle. You prefer to buy at a low cycle. But I will not buy assets in chemicals. It’s not afraid. Don’t be afraid [indiscernible] , there is no mistake. I’m not there. I think it’s part of the — as long as they are integrated to the refineries and strong refineries, it’s okay. Again, when we have weaker assets, we take a decision.
And on Antwerp, it has been possible that we accelerated the decision, by the way, because at the same time, the refinery is doing well. So translating some people. We have a lot of more and more people going in pensions in Antwerp because of retirement age. And so we moved people from the cracker to refinery. So it was a good way to manage this shutdown. So that’s where we are.
Lucas Herrmann BNP Paribas Exane
Sorry, Patrick. The question was more on Hutchison itself to…
Patrick Pouyanné Chairman & CEO
You should ask the question clearly. Hutchinson this is not a chemical business. It’s a manufacturing business. And by the way, Hutchinson performance is very good.
Lucas Herrmann BNP Paribas Exane
Yes. On the other side of it to what extent — and it still fits very comfortably within your portfolio?
Patrick Pouyanné Chairman & CEO
I don’t spend much time. I can’t tell you, 1 hour per quarter.
Lucas Herrmann BNP Paribas Exane
Okay.
Patrick Pouyanné Chairman & CEO
For good business, that’s right. But if you find a good buyer. No, no job. Honestly, it’s a company which works well. There is no problem. It’s not — I have over more interesting I would say, M&A to do for the company, for the future portfolio of the company in oil and gas or in integrated power not to spend too much time and to have pro issues or worries about this type of — it works well, so I’m comfortable. That’s where we are. I have better ideas for the future of TotalEnergies and no problem with it some being in our portfolio.
Operator
The next question is from Kim Fustier, HSBC.
Kim Fustier HSBC Global Investment Research
I had 2, please, on the upstream. The first one is on your portfolio activity. You’ve been very active in recent months, and you’ve done a lot of deals to replenish your upstream an LNG portfolio for the post 2030 time frame. I think you have deals like Algeria, Gulf of Mexico, Malaysia, I just wondered if that signaled a change in your view fundamentally on the prospect or the timing of peak oil demand, are you effectively trying to extend your production plateau to sort of match the shape of global oil demand?
My second question is on disposals. Some of the upstream disposals that you’ve announced weren’t necessarily expected [indiscernible] or Argentina Shale, all these opportunistic deals whereby you’re sort of open to incoming bids or are disposals increasingly an important part of your cash flow cycle is the way of maybe generating cash to support your balance sheet?
Patrick Pouyanné Chairman & CEO
Very interesting question, Kim, both of them. Okay. In oil and gas company and an energy company and oil and gas, in particular, you have a natural decline. One of the objective of the management is to think long term and to not — it’s not because we have a very large portfolio of opportunities between today and 2030, but the life does not end in 2030. So we must continue.
And I think for the time being, it’s not a matter of history peak oil pick blah, blah, I don’t know peak oil or peak demand or peak of price. Our duty is clear. We have one way to look to opportunities. If it’s first quarter, second quarter, which means less than $20 per barrel CapEx plus OpEx, low breakeven less than $30 per barrel. I’m happy to continue to provide this type of opportunities to the portfolio of TotalEnergies for the future because these opportunities will be profitable even during the 2030 plus, even if you have a beginning of a decline of oil demand, it’s possible. I don’t say no.
So the protection that I bring to our shareholders is we are first, second quarter assets, and that means that we can continue to allocate capital to these assets because they will make money even if the decline of oil price. Decline of demand, by the way, decline of demand does not mean necessarily decline of oil price. People have — because everybody anticipate a decline of demand, you have less projects. So it’s good to have some projects just to be there and to capture these opportunities. So yes, we continue to work.
By the way, most of what we have done is not so much oil, what we have announced, it’s more gas, in particular in Malaysia. The Malaysia story, we will come back on it. Some of you were probably surprised when we acquired [ SaphoraNV ] last year, why do we build this position. And now you have this follow-up. We are very happy about the last deal we’ve done with PETRONAS, which is 12 blocks, not only exploration because in the 12 blocks, there is a DRO, discovered resource opportunity of 340 Tcf, which we will develop.
So it’s giving, I can tell you, a good additional value to the fact that we have acquired this position. These type of things are very logic and gas. Gas in Asia, honestly, there is a bigger demand. So it’s good to continue. Divestments, no, I think it’s very consistent of last divestments. We told you we have a very broad portfolio. Some people even think we have too many opportunities. But I prefer to have a lot of opportunities and then to arbitrate. Of course, look, these 2 opportunities, which were nonoperated by us with minor share, why allocating capital to — even if the project, I don’t consider the project is not good.
I just say we prefer to allocate capital to larger to Suriname and to Block 53 to expand Suriname than putting some billions of hundreds of million dollars to finance the 12.5% share in Bonga. So it just — it makes very sense. And we get to do math the same. We have a huge portfolio in Brazil. [indiscernible] all that, Lapa extension. So it’s a matter of managing and to keep the discipline, I think, on the CapEx. If I keep everything — and so I prefer to arbitrate the nonoperated assets, which, by the way, in both cases, have a higher cost than our $20 per barrel.
So I’m not completely fitting our metrics, but it’s quite logic to divest them and to find a buyer, which in both case, by the way, is the operator. So it makes a lot of sense. And I think it’s part of what we have to do for keeping care of the allocation of capital for our shareholders.
Operator
The next question is from Alastair Syme of Citi.
Alastair Syme Citigroup Inc.
One question on biofuels. The — my observation that maybe I’m wrong, that European countries seem to be quite slow to late state on Red — do you sense in your discussions that there’s any political debate about the cost of biofuels given that renewable diesel and South are still 3x the cost of the fuel they had to be replacing?
Patrick Pouyanné Chairman & CEO
On the biofuel, I see most debate about what is around hydrogen and all these type of molecules. On biofuels, I don’t think there is — in fact, the biofuel business is more hit today by different elements, in particular, on the sustainable addition fuels — there was a new regulation which was issued in summer ’24, which allowed to make co-processing in our refineries. We co-process some used cook oil or some HBU that we produce in biorefinery to make sustainable addition.
Of course, the costs when you co-process in an existing flow, the marginal cost is almost near, I would say. So that clearly has changed some. And I think some countries begin to think — what is the share we want to allocate to that compared to, I would say, the pure biofuels products. Of course, it’s very important for companies like us when we invest in biorefineries. I’m also a co-processor so both. And that we need some more clarity because it’s possible. But today, because again, what happens in this debate and airline companies are very vocal. Everybody like always in energy, they want the cheapest possible product. They want the low carbon product, but the cheapest one. if it’s cheaper to make it by co-processing but making as a transformation in the biorefinery, they will favor the first line and so forth us, it’s clearly for me, so that’s true in our plan.
We have done a made have done now. We are thinking to a third one. We — for the standing we have postponed it because we said to the team, look, there is maybe a change here in this market. And let’s put because honestly, to make more coprocessing within total energy, it requires few tens of millions. I mean we are not speaking about 100 million, it’s less than $50 million, we could produce more. So this is what we will do. So this is not — this is slow to regulate there are new elements of regulation. The lesson is that this biofuel market is a regulated market. These molecules are regulated. And all that — and it’s a little true what you said, Red is a European directive, but then each country begins to make its mix. So we have to navigate for that. and not to anticipate too much on what could be the regulations. But then we could make some misallocation of CapEx.
So this is where we are. So — but the biofuels, I see, I think we have — I mean, we need to integrate this. There are some technological disruption in fact, which is what happened. — because when we are listening to my refiners, why don’t we process 5 years ago, we were speaking about corrosion difficulties, in fact, we make some test is no industrial corrosion, et cetera. So things are moving. Things are moving in all these new low carbon fuels.
Operator
Next question is from Henri Patricot, UBS.
Henri Patricot UBS Investment Bank
Just one topic that, which is Namibia. I was hoping you give us an update on the business the way you just online and also the project could change if you get involved in the lockbox door with the [indiscernible] discovery.
Patrick Pouyanné Chairman & CEO
Next is obviously, yes, I told you that I visited, I don’t know, I mean I mentioned that it Namibia met the new authorities, it’s a new government and very willing to, of course, to develop the oil industry. We are the first 1 there with a project. So we have, of course, to tackle some issues with them. I receive letter and asking us to engage in the discussion. So I think there have been a team set on the named side, reporting directly to the President of Namibia, which was our decision. And on our side, we are ready. So I think it’s a matter of we are working.
But again, I think we need to — it’s a little like Mozambique. You have a new country to all industry. So it’s important to ensure the alignment, the good understanding. So I don’t want to have a dispute investing and then discovering a problem because the Namibian authorities will have the feeling that we are not but we did not understood all the projects. So I want everybody to — it’s better to take time at the beginning even if, of course, we are ready and they are very motivated to they would likely oil to be produced before end of 2019. So that means that we should take decisions this year before end of ’25, we want to meet the target. So this is what we explained to them, and then we’ll do it. We’ll work — we are working with them. I cannot tell you more.
On the opportunities next door, again, it’s not really next door. It’s a little far away. We’ll see. I mean, we’ll see what will happen — we’ll see what will happen in this business. But again, it’s — I’ll let the company working on it. Okay. Then what we do, by the way, on our side, Namibia for me, it’s also — the next news will be South Africa because we have also some wells to be drilled. We have some attractive license just across the border and we have actually 2 or 3 prospects, and we’ll — we are working in South Africa, the process to get all the authorization is quite a little long, but we hope to begin to drill South Africa targets in ’26 from ’26. So that’s where — that’s also, Namibia is also linked to this one.
Operator
The next question is from Paul Cheng of Scotiabank.
Paul Cheng Scotiabank Global Banking and Markets
Patrick, good morning or good afternoon. Two questions. First, in the U.S., we have a president that love to have tried maybe in the middle of the and subsequently, that often make a significant impact on the market condition. I see in any shape of phone that impact we how you manage your trading operation that because a lot of time that the trip is going to insert an element of prepay capacity. You can’t really detect what he may or may not do yet at a particular moment. So how are you guys will be impacted or that you’re saying, okay, this is just part of normal operations, so I’m not going to impact by that.
The second question is you’ve been reducing your European refining and chemical operation for obvious reason, in the long haul, do you foresee that you may totally extent from refining and chemical in Europe? Or that you think ultimately is still going to have some position. You just lead to strengthen it. So just how you view on those ones that in the long-haul position in your portfolio?
Patrick Pouyanné Chairman & CEO
I think on the first one, I commented it already. It’s true that traders have to be — do not like too much to see — I would say, they fundamentally try to trade around fundamentals to take position about analyzing the supply and demand, and the difference regions and the different optimizing logistics and all that. And of course, they don’t like too much to see this element of certainty with markets reacting very quickly to a tweet makes their position quite string. So yes, like as Jean-Pierre is just telling me a nice sentence volatility around it is not salable. This is what — by the way, but the world, that’s true.
Volatility around it is not tradable. And that’s what our trade as solder. So talent expect us to make maybe they make very good results about the old business, the old guys where we are completely in line with our expectations, but the allays don’t expect some time we could expect more, but we can be reversed, and so we are obliged to be more short term, I would say, that’s the consequence of that, even if you want to play 3, 6 months, you could be suddenly your position, which seems to be good. could become not the right direction. So that’s the difficulty of it.
Having said that, again, they have our trust and our support, and they are, I would say, they are aware and I trust them. They — we know what they can do and what is tradable or not. And so honestly, in again, the old trading of TotalEnergies also as expected. So there is no problem. So on refining, okay, look, it depends what will happen. There are 2 different positions that is linked. If Europe clearly goes to no more gasoline EV vehicles, light vehicles in Europe, we don’t need to have refineries to produce gasoline. I mean I’m just — a, the question, it’s not 2035. 2035 will be stopped commercializing if really stick on this position. But by 2015, normally, there should not be a lot of gasoline cars in Europe. But I could think it will be a reality. Then of course, we have to think to this perspective. It’s still long the way, but we have to think to that. We have some very strong assets in Europe.
So I would see the stronger ones are well known. It’s unvein particular. It’s a very strong asset integration. So the first postal assets which survive. The first quarter, we need to think to the future the future might be to become biorefineries, like we’ve done for 2 of them. Over future for a cracker, if we can do it or shutting down the tracker in number because in other we’re able to — we have taken the decision because we didn’t see how to maintain an isolated cracker in this context. So I mean, will we keep the position, I think this position is a dynamic position, which will evolve according to the market, which is declining. Strengthening — and maybe because it could be one of the last refineries in Europe.
We cannot spend too much money on this one. And that’s one difficulty is that refineries if you want to maintain, I mean, good availability of refinery with high level of safety, which for us is fundamental required to have a maintenance CapEx, which is quite burning some cash. So all that is better to have — what we monitor there, I will tell you, is what is a global cash position — net cash position on refining in Europe. And of course, if we begin to have a net cash negative, then we have to be a bit tougher on these ones. We know the renew the issue. We are in Europe. It’s part as well. That’s why to you have — if you look to the narrative around energy in Europe, it’s more and more about energy security, security, energy security. And refineries are part of the energy security.
You’ve seen the debate in California recently where California, people are very afraid not to have enough refinery. It’s quite funny because they have made regulation to shut down all of them. U.K. as well. You’ve seen that 2 refineries have been announced to be shut down. So that’s where, by the way, government will be an interesting direct debate with them. Because on one side, they give us a signal that they don’t need gasoline and by a certain distance. And on the other side, some people will say, yes, but we need these tools just in case, just in case in the future. So I think we have — so our objective is, at the end of the day, to reinforce the first quarter assets and the others to find a respectful evolution for our people.
Operator
The next question is from Jean-Luc Romain of CIC Market Solutions.
Jean-Luc Romain CIC Market Solutions, Inc.
It relates to the asset sales you plan in the second half in integrated power — do you believe it will put back ROCE of this division back within your 10%, 12% target? That’s the first question. The second is out of the portfolio of VSB, out of the portfolio of VSB, how much did it — went into the under construction tables and how much went into the under development project out of about, I think, 18 megawatts of projects that were mentioned in your press release of the acquisition.
Patrick Pouyanné Chairman & CEO
So first, no, sorry, reasonable. We announced that we want to be at 12% by 2028, 2030. So we don’t — we will not reach 12% because of divestment of the cigar it takes more time. We are still in — we are seeing a growing move. So our capital employed are still growing, which is normal. I accept it. So today, we are more in the 9%, 10% range. It’s for a year. The 12% we require just a certain point to have enough capacity to stabilize all that and to continue to develop the integration, which is done.
So no, I will be cautious this year. We are still, obviously, targeting the 10%, 9% to 10%, that’s what we want, and this is where it will go, and I’m not [indiscernible] but I don’t expect 25%. It’s not on the road map for my integrated forward teams. But we have a lot of challenges in front of them. I don’t want to add on this one. So that one may be a disappoint, but it’s more pragmatic. On VSB, I’m looking to my friend to give me — what is it was 500 megawatts installed, but the question you are asking is what is the split what is under construction and what is more in development. So I mean, I know that we have approved recently 3 projects on in the executive committee, they came — in less than 2 months, they came to us to approve 3 projects. So I’m quite — but I think — I don’t have the answer to your question, Jon, sorry.
But I think Ronald and Steve will come back to you. I mean I’ve seen the figure, but I don’t want to make a mistake here to give you a wrong figure. I think I will come back to you. Again, we have [indiscernible] just to demonstrate that we have approved around the to 3 projects recently, which were representing globally, I think, something like 600, 700 megawatts, and there is more to can. Yes. What we plan to develop but I’m not sure.
[indiscernible] but I don’t know what it is long-term plan that Yes. We could see something like — we will come back to you. I think it’s speaking way, but I will come back to you. I prefer to give you a wrong information on this one.
Operator
And the last question is from Jason Gabelman TD Cowen.
Jason Gabelman TD Cowen
I wanted to ask on integrated power in the U.S. specifically. Given some of the changes to the tax credits in the recent tax regulation that was passed, does that change your view on the pace of development in integrated power in the U.S., the returns and the ability to farm down assets there?
Patrick Pouyanné Chairman & CEO
I will tell you, in fact, what they observed from the farm down on the contrary is because there was — there is a fear of scarcity of these type of assets. financial investors which are, in fact, buying this farm down are even more aggressive on the valuation. What is more piloting the farm down is more the interest rate, to be honest. But today, the scarcity of assets or the risk of scarcity, there is some appetite. There is no doubt.
And as I said, we are farming down 1.5 gigawatts, and we received very good offers in line with our expectations. Then don’t misinterpret what has been the beautiful bill for renewables. In fact, when you look at the end of the process, tax credit, either PTC or ITC that did not really change, providing that the project will be put into construction before mid-’26 or ’27, mid-’26, I think. And so we are working on that, what we call safe harboring. And we — of course, the condition of safe harboring are important. But when we look to our portfolio of projects, it’s for us, when we look to what we were planning to develop between today and 2029, 2030, we are — there is not much impact on all that. If we can safe harbor, of course, correctly and according to the rules that — but I think we will come back to you on this one as well end of September.
But the ITC and PTC quantum did not change, in fact. And the capacity to, I would say, how do we say that migrate between the market for ITC, PTC continue to remain. What has been the tax partnership and all that remains. So most of the — it’s just a matter that it will elapse in time. So — but with what has been voted in Senate, it’s possible to use that. It could have some impact, but is one part which is more impacting in fact, for me, these businesses is more the tariff as I said before, because the tariff, you don’t have today in the U.S. enough manufacturing capacity to make all the projects. So this tariff, it depends and the tariffs are not the same for all the countries. We are, I would say, in a shadow today, we don’t know.
So of course, it will — it could have an impact on us on diversifying our supply chains, finding new countries. I know that we stopped one project in April with a provider coming from China, but we managed to replace it with a provider from Vietnam. And by the way, this Vietnamese company wants to build a manufacturing plant in the U.S. So you will see some ways to — I mean, this dynamic will come. Finally, building a solar plant manufacturing, manufacturing plant for solar is not so complex. In fact, it’s — but we see some trends. So again, I don’t tell you there will not be a form of slowdown, but this will not be dramatic. And again, for us, it’s value over volume, to be clear. I’ve been very clear with my teams.
Okay, you want to grow, but we will grow at a pace which will be allowed by the global framework. And so we need to digest all these information. And — but the last news I’ve got now that the bill has been enacted are more positive than what we thought. There is one segment which has completely we put into, I would say, a sleeping mode is offshore wind. This is completely slipping now, sleeping means no is taking — we have reduced at the minimum any cost on this one. But integrated power is also gas power plant. On this one, I can tell you. We could make a lot of money by farming down part of the 1.5 gigawatts we have acquired 2 years ago in Texas. We could find — at the end, we want electrons. We can move from totally scheme. So there are ways to mine to use these type of assets to get some money back.
So there are good things as well in what happens in the U.S. on the electricity side, including gas to power, which is, of course, at the core as well of our business model. It’s not only renewables. Our business model, in particular in the U.S. is gas to power plus renewable, but gas to power are very important.
Jason Gabelman TD Cowen
And then my follow-up, it’s probably fitting to on a CapEx question given on the — all the focus on that. So it seems like to hit the organic CapEx target, CapEx needs to slow by almost $1 billion from 2Q levels. Can you just give us some sense about where the activity is slowing down? And also if Mozambique LNG, if that moves forward, is that already in the CapEx budget? Or would that be incremental?
Patrick Pouyanné Chairman & CEO
If Mozambique LNG is moving forward, it would be externally financed. So the impact on the CapEx budget is quite limited.
Jason Gabelman TD Cowen
And just more broadly on…thank you.
Patrick Pouyanné Chairman & CEO
Sorry, Jason, but I cannot give you — I mean, I don’t have all the details to this one. No, but I mean, we know where we are going. We know why. But for example, I will tell you, this pipeline in Uganda, we put in place a project financing around in the middle of the second quarter. So it has a positive impact on the CapEx on the second part of the year. So the run rate of spending was higher on the beginning of the year.
But the second half, this is very pragmatic this one. So when I told you that we will stick on the $17 billion, $17.5 billion, I repeat it, you can believe me, know what is behind.
So I think we come to the end of the call. Do we have another one?
So thank you to all of you for all the debate and questions. Again, I think the keyword of TotalEnergies, I know it’s little borrowing, which is consistency. It’s good for us, so boring, consistent in the strategy and again, keeping the return to shareholder on the high side. So I think it’s good news for our shareholders. Okay, we are in a cyclical — we are in a commodity business. We don’t control the markets. And today, they are — there is volatility from supply and demand side, but also from geopolitics.
So it could be on one side and we go the other way. What I’m sure is that we manage — we have the flexibility, the agility in the company to manage all this volatility, and we are growing again. And by the way, the growth is delivering some additional cash flows, which is very important for the Board. The Board already monitor as well, do you deliver what you said in terms of growth of productions on both sides in Integrated Power and in Oil and Gas. And I will be happy to meet all of you again in New York on September 29. I know it’s an annual one.
So we will give you even more certainty about our business plans towards 2030. And that I hope — I am happy to — in advance to and enjoy to meet you there with all my executive committee. Thank you.
Operator
Ladies and gentlemen, this concludes the conference call. Thank you for your participation. You may now disconnect.
Source: Market Screener
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