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Eni S.p.A (NYSE:E)
Q4 2020 Earnings Call
Feb 19, 2021, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Claudio Descalzi -- Chief Executive Officer

Good afternoon, and welcome to Eni's 2020 [Phonetic] Results and Strategy Presentation. Due to COVID restriction, we are livestreaming today from our R&D headquarter in Milan. After -- at this time last year, we were presenting our long-term strategy. Today, we are taking another step forward in boosting our transformation. Since 2020, we have filed the improved and accelerated our strategy, and we can now announce our commitment to be truly carbon-neutral by 2050.

In line with these target, we are also announcing the merger of our retail and renewable businesses. This will allow us to be even more efficient reaching our Scope 3 target and to extract more value from our unique retail customer base. We remain committed to becoming a leader in producing green energy and offering our customers a full set of decarbonized products. Strong financial discipline remains the key component of our strategy. The material reduction of our cash neutrality. We have built a robust balance sheet with resilient cash generation respond to market evolution. All these actions are aimed pain at maximize value creation for our stakeholders and how enhancing our remuneration policy.

Let's now recap both actions and result of 2020. We'll never forget these exceptional year, which was marked by the most unexpected and the strategic challenge we have ever faced. The pandemic effected everybody's life, every activity and the energy industry with the magnitude that exceeded all previous crisis. In tackling COVID-19 with active fast, signed our company the energy, resources and flexibility to overcome the crisis.

We immediately worked on three priorities: first, we protected our people and the integrity of our assets; we safe guarded each of the 60,000 women and men they work with us and around us worldwide. In less than 24 hours, 99% of Eni employees in the main offices and 70% in our operational side were conducted to smart working. At the same time, no operational interruption due to COVID were recorded.

Second, we preserved our balance sheet. The three budget revisions and leveraging our flexibility, we cut capex by one-third, a implemented material and structural cost savings. Thanks to these action we succeeded in minimizing the impact of COVID-19 on our balance sheet and in keeping our net debt flat versus last year.

Third, we changed our organizational structure. To better fit with the new strategy. We set up two business groups to pursue our long-term targets. Natural resources to integrate in the carbonite our upstream and gas marketing operation and energy evolution to transform and serve zero carbon products to an extended client base. In natural resources, we recorded a production of 1.3 million barrels per day, in line with our COVID-- post-COVID guidance and exploration we discovered 400 million barrel of resources in Egypt, Angola, Mexico, Vietnam and UAE. Global gas and LNG delivered an exceptional performance, driven by the flexibility of our portfolio and by our trading, which was able to capture the value of the market volatility. We are continuing to reduce our carbon footprint with natural sync through our rate plus initiatives, and we are progressing with our project on carbon capture and sequestration.

In energy evolution, we are accelerating our plan. In renewable, we have 300 megawatts of installed capacity with a new project start-up Italy and Kazakhstan. On top of this, we are developing 700 megawatt through important joint venture in the US and the UK. Where we entered with a material stake in Dogger Bank, our first offshore wind project. In the near future, retail gas and power, which delivered an outstanding EBIT result last year, we'll be able to sell green power to its clients in an expanded geographical presence. In line with this approach in January 2021, we entered the Spanish market, with the acquisition of local retailer and the development of three new solar plant. Even in a year of lockdown, marketing and biorefineries achieved record result, proving their potential combined value.

Our rapid and extraordinary reaction is clearly proven by our financial results. Eni remain organically free cash flow positive with a net debt kept stable at EUR11.6 million. And now our strategic plan. Eni will be zero carbon energy company by 2050 in Scope 1, 2 and 3, we are all focused on these target with the ultimate goal of being a world-class investment case. Our strategy is built on three key pillars: first, decarbonizing operation and products in line with what we presented last year, we will deliver our customers and entirely decarbonizing mix of products. Second, diversifying and expanding our businesses in retail and renewable by product and circular economy. And third, increasing the resilience and flexibility of the company to absorb price volatility.

Selective growth increase efficiency and right-sizing will continue to ensure value and high returns in all our activities. The three pillars of the strategy are based on two solid foundations: first, minimizing environmental impact addressing issues of socially inequality and strong governance model, in order to achieve UN SDGs and to increase the value for all our stakeholders. The second, technology and digitalization to derisk our presence and accelerate our transformation.

Technological innovation is an essential part of Eni's DNA. For decades, the application of our technologies has been a distinctive factor for us. Digitalization, thanks to our proprietary algorithm and a top computing capacity, has been and will continue to be a competitive element for us right along the value chain. These starts from our exploration where we have been delivering outstanding performances through our industrial processes to preserve the integrity of our assets, while maximizing the efficiency and lowering the time to market. and, finally to offering our large customer base enhanced customized services.

Eni's R&D with more than 700 -- 7,500 patents and 450 projects will be a catalyst in accelerating energy transition. Ecofining and it's propriety biofuel technology is at the heart of the Gela and Venice plant, while our waste to fuel is moving to an industrial appreciation. In chemicals, we are expanding the use of vegetable biomasses to create high growth and value chain, such as-second generation bioethanol, advanced biofuel and biomonomers to several application, such as intermediates for bioplastics, electronics, cosmetics and agrochemical. We are already commercializing high-quality products from mechanical recycling of post-customer plastic waste with the level or recycled content, up to 75%, and we are developing a [Indecipherable] technology to recycle mixed plastic waste.

In carbon sequestration usage, we are developing two additional technologies: one, is related to CO2 mineralization in the cement formulation process, where we have a pilot project ongoing in Ravena. And the other is related to micro-algae biofixation, where we have a pilot project in Sicily and where we are -- we plan to develop an additional project in our Gela biorefinery. We have a strong focus and commitment in developing new technologies and breakthrough solutions. And to this end, we are collaborating with more than 70 international research institutes and university. Overall during the full-year plan, we will spend around EUR1 billion on innovation also feeding our green and bio transition. And we will invest around EUR4 billion organically in all our transformation processes.

And now let's get to the heart of one of the major improvement we are announcing today, Eni will be carbon-neutral by 2050. In last year strategy presentation, we announced our target covering our Scope 1, 2 and 3 emission and based on our fully comprehensive methodology of GHG assessment, considering all activity and every products we trade to reach a reduction of absolute emission by 80% in 2015. This year we have improved these target, committing to reach a cargo neutrality. This is a target, not an aspiration. We have said this considering all our activities and combining economic assistant ability with industrial implementation.

Our commitment is further confirmed by the inclusion of our decarbonization target in our management remuneration policy. Before the cannibalization of our product and operation is achievable through technology that already exist and that has already been through, such as biorefineries, whose capacity will increase by 5 times; the circular economy with a large use of biogas and the recycling of organic and inorganic waste material, efficiency and digital solutions in our operations, in our customer services. Renewable capacity fully integrated with our client; and blue and green hydrogen to lower CO2 emissions in our biorefineries and in other hard-to-abate activity. Gas, which in the long terms would be more than 90% of our upstream production, will support our transition as backup of intermittent sources in power generation. On top of this, natural artificial carbon capture will absorb residual emissions.

Let's look at the full-year plan of our two business groups. In Natural Resources, especially we have two main goals; reducing our cash breakeven and our carbon foodprint. In upstream in the full-year plan, we will further lower the price level then will be required to generate future free cash flow after capex. Over the last few years we have materially reinforced our upstream business, reducing its cash needs, while continuing to capture new business opportunities. During the plan, this will result in a drop of our upstream capex coverage by almost $10 per barrel to $28 per barrel this reduction will be driven by a little bit more focus exploration in synergy with our existing facilities, short cycle development project and structural saving in operation, cost and D&A.

In this three-year plan, we will invest, on average, around EUR4.5 billion per the year on which -- for which reach about 50% would be required to fight depletion and 50% will be developed -- devoted to grow.And we will retain enough flexibility to absorb price volatility if necessary. In the last two years of the plan more than 55% of our capex is uncommitted making our upstream even more resilient to lower scenario. Upstream resilient start from exploration. For us these activity has been a strong cash contributor in the last decade and will be a distinctive and critical factor of success for winning the energy transition. This is the main source of our low breakeven portfolio, the starting point of our value creation with an average unit exploration cost below $2. It will be a key enabler of our transformation to our more gas reach portfolio, it is time effective, thanks to the selection of project that will be for almost 90% near field and improving basin.

Finally, our future successful exploration with great opportunities for potential disposal showing our dual exploration model. In the plan, we expect to discover 2 billion barrels oil equivalent of resources of which a large part will be gas. Selected growth will support the increase of our free cash flow in the full-year plan. Production will grow at an average of around 4% per year versus 2020 at any scenario. While in the same period our cash flow from operation will grow by 20% for the year. Assuming $50 flat, our cash flow from operation we grow by 8% per year. For 2021 a transition year before fully recovering from COVID, we confirm our production guidance in the range of $1.7 million per day assuming OPEC cut of around 40,000 barrels per day throughout the year. However, we had the flexibility to restart part of the activities as soon as appropriate market condition occur.

In the plan, we will bring 14 major projects on stream, operating over 70% of the new production. In terms of future production mix, we expect to increase share of gas in the coming years. In 2024 around 55% of P1 reserves will be gas versus 50% today. Upstream, free cash flow in the three-year plan will be in excess of $18 billion at our scenario and EUR14 billion assuming a flat scenario of $50 per barrel. Covering twice our full-year plan distribution need. Global gas and LNG portfolio is now incorporated in natural resources business to leverage our integrated presence along the gas value chain. In LNG, we target to contract more than 14 million TPA by '24 and 45 growth versus 2020 level. Mainly from our new project in Indonesia, Nigeria, Angola, Mozambique and Egypt where the start-up of Damietta has been completed and the first cargo is being loaded in these days.

In terms of marketing, we will target premium market in the Middle East and Far East, but we will also leverage our legacy presence in Europe to maximize overall volume. LNG growth will be driven by our equity production that in 2024 will account for more than 70% of our LNG portfolio, global gas and LNG will contribute with EUR800 million to the free cash flow in the plan period. The second main goal of natural resources is minimizing carbon footprint and to develop initiatives to remove CO2 such as forestry preservation in CCS. Eni is focusing on plus initiatives to maximize the value for our stakeholder, recorders preserve primary, secondary forest biodiversity, mainly in Africa, South Asian and Latin America.

We target to offset more than 6 million ton per year of CO2 by '24 and more than 20 million ton per year by 2030. Our CCS project are synergic with upstream. We aim to create worldwide storage hubs for the carbonizing our industrial activities, such as power plant and refineries and third party plant. The Ravenna CCS hubs with more than 500 million tons storage capacity, we will benefit from the infrastructure in place and is proximity to industrial site with attractive cost in time to market. In the UK, our two project Liverpool Bay and Teesside will contribute to decarbonize third party industrial sites. We have built a distinctive set of competencies in managing carbon capture and storage technology through our experience our gas injection in mature and producing field worldwide. We are at the feasibility phase of the carbon capture project in the UAE in the Ghasha gas field, we are also studying CCS application in Libya for a Bahr Essalam project. By enhancing our CCS project portfolio by 2030, we target a total storage of around 7 million tons per year with an overall gross capacity of 15 million ton per year.

Turning now to energy evolution. This business group is expected to sell sustain its transformation and gross during the plan. In refining and marketing, we expect to increase results in all our business lines by refining and marketing and traditional plan. At a constant scenario, R&M EBIT will almost double in the planned period. Growth will come from first, the increase in bio refining capacity, which will double to 2 million ton by 2024, targeting also the biojet fuel market with a share in excess of 10%. Back on the gradual recovery of demand after COVID-19 crisis; third focus on high-margin segment in marketing and large Angola network in Europe and fourth, the contribution of ADNOC refinery at full capacity. Our biorefineries will continue to contribute positively, becoming plan -- palm oil free in 2023 and with the growing contribution of feedstock coming from waste and residues, accounting for around 80% of the total by the end of the plan versus today 20%. In terms of sites, Porto Marghera in Venice will increase this capacity to 560 kilo ton per year, while the Gela bio refinery we complete the ramp up to 750 kilo ton per year. Moreover, we are planning a new capacity of around 500 kilo ton per year, whose location in Italy or abroad is still under study.

Finally marketing we delivered during the plan a steady and material contribution and we enlarge is e-mobility services. The combination of bio refineries in marketing, will deliver an EBIT of around EUR715 million at the end of the plan. And with traditional oil refineries, we will reach EUR1.4 billion. And now I would like to present another main step of our transformation. We further maximize biogeneration along whole green power chain and foster our decarbonization Scope 3 target, we have decided to merge our renewable business with our gas and power retail business. So one side, we will leverage a 10 million customer base, expected to increase to over 11 million by 2024, and accelerating our growth to 15 million by 2030, that will be increasingly supplied with equity renewable energy and biomethane. This business combination make any one of the main green retail operators in the Europe market -- European market.

On the other side, our renewables are expected to reach 4 gigawatts by 2024 and 15 gigawatt to -- at 2030. Our generation by the end of the plan would be 60% solar and 40% onshore and offshore wind. We are growing fast to become a major global green power operator in many ICD countries, in most of which we already have a large retail base and in other areas in which we are present such as North Africa, Australia and the Middle East. Overall capex for the combined businesses will be EUR4.3 billion in the full-year plan mainly related to renewable. These new business combination is highly valuable in growing fast. Overall, our retail and renewable business will almost double its EBITDA from EUR600 million in 2021 to around EUR1 billion by the end of the plan.

In retail, we expect EBITDA to grow to EUR650 million also thanks to an increase share of services which has distributed generation, energy efficiency solutions and service for e-mobility, which will represent more than 20% of the EBITDA. Meanwhile, renewables, which today are the breakeven will deliver robust EBITDA of EUR230 million in 2024. Our final goal is to maximize the value of these combined group of activity.

And now before leaving the floor to Francesco Gattei, our CFO for his financial section. Here is a brief video that sum up the main highlights of the presentation.

[Video Presentation]

Francesco Gattei -- Chief Financial Officer

Good afternoon. And now let's get some details on our financial plan. Eni financial strategy will be a structural component in the execution of the plan. It will be centered on a diversified set of levers. Our capex flexibility, an active and dynamic portfolio management, including new business combinations and a new set of financial tools linked to our strategy execution. While continuing to reinforce our balance sheet, reducing our leverage, we are also committed to a progressive and competitive distribution policy.

On capex we will be focused on new businesses and we will continue to be extremely selective our returns and on duration of the cash cycle. Over 20% of the yearly average capex will be devoted to boosting our renewable capacity and increasing Eni customer base, circular projects that will minimize waste and rejuvenate mature industrial sites and building incremental biorefinery capacity. Net capital employed in all these activities will reach 10% of the total amount, doubling the current level. To maintain a high degree of flexibility, we will focus on short cycle initiative, and we will limit inactive capital within the 20% of our total investment.

All our planned projects have to pass a selective screening both in term of profitability and resilience. The internal rate of return of upstream projects amount to 18%, and it will remain robust 16%, even if we assume 20% lower price. Our renewable project are highly valuable tool with a leverage rate of return in the range of 6% to 9% and double-digit after financing. On top of this rate of return of biorefineries is 15% in line with our upstream initiatives.

Portfolio management will be a core element to boost our transformation, extracting extra value from our asset and disposing of non-core businesses. In the four-year plan, our disposals will reach an overall gross value of more than EUR2 billion, most of these proceeds will be reinvested in acquisition for portfolio reshaping. Moreover, we aim to replicate our Norwegian Var model in different countries. With potential business combinations, which are currently under screaming. Both these opportunities are not captured by the current plan, and therefore represents an operating and financial upside. Assuming the progressive increase of oil price to $60 per barrel, as per our scenario assumption, cash flow from operation before working capital is expected to amount to around EUR44 billion along the plan period, while it will be $39 billion in a flat $50 scenario. This with a steady amount of capex of around EUR7 billion per year, will ensure a generation of free cash flow EUR17 billion at our scenario, for a EUR12 billion, if we assume a $50 flat Brent.

We will continue to improve the resilience along the plan period. Cash neutrality, the level of price that we have necessity to cover our capex need and the floor dividend will be progressively reduced below $40 per pound. Finally, while targeting a average pre-IFRS in the range of 30% in 2021 and declining that after, we will look for a full engagement of our lenders to support [Technical Issues]

Operator

Ladies and gentlemen, please hold the line, the connection with the moderator has been lost the conference will resume shortly. Thank you. Ladies and gentlemen, please hold the line. The conference will resume shortly. Thank you.

Francesco Gattei -- Chief Financial Officer

[Technical Issues] $56, we will pay EUR0.63 per share. And we will launch the buyback of EUR300 million. In the backup, you can find a table that summarize the level of dividend and buyback at different price scenario.

Before concluding, our total dividend will be split 50:50 between the traditional dual tranche of payment in September and May. And of course we will continue to pursue further actions to improve this distribution model in the future.

Now I return the floor to Claudio for his conclusion.

Claudio Descalzi -- Chief Executive Officer

Thank you, Francesco. To conclude I would like to highlight the major update of today. Eni is committed to be net zero by 2050 across all our Scope 1, 2, and 3 GHG emission of all our production and traded products. We have also set out the specific actions we are taking over the next four years. These action are fundamental steps to become even more innovative and resilient in order to manage the extraordinary volatility of our time and enhanced remuneration policy.

In this period of exceptional changes, we will leverage our considerable strength. Our large customer base, which we'll continue to grow in synergy with our renewable business, our bio refining and marketing, which combined will provide strong contribution in delivering sustainable products for mobility, and an integrated upstream model, which is able to reduce both it's cash neutrality and carbon footprint. Our plan to be carbon neutral in 2050 is concrete, detailed, economic and sustainable and technological improvement.

In addition, we have disclosed our target for 2030 and 2040. Two important milestones for our stakeholders to be -- keep aligned on our progress. Eni, it's people and the Board of Directors expressed a strong commitment to continue to play sustainable and innovative role in supporting social and the economic development in all our activities. Our strong ESG model provides the fundamental for our aim, which remains to deliver value to all our stakeholders. And now together with our top manager, we are ready to answer your question.

Questions and Answers:

Operator

The first question is from Michele Della Vigna, Goldman Sachs. Please go ahead.

Michele Della Vigna -- Goldman Sachs -- Analyst

Thank you very much, Claudio and Francesco. Thank you for the time and the total presentation. I had two questions if I may, the first one is on net your emissions reduction. So I can see that the absolute emissions are falling about 60% faster than the carbon intensity both to 2030 and to 2040. And I was wondering would this comes from. Does this effectively means that you're likely to sell less energy volumes by 2030, you speak clearly have a growth plan to 2024. So, I was wondering what is the overall volume assumption there?

And then the second thing, I wanted to ask you is about your biofuel business, so you're targeting to NPPA of biofuel production. I was wondering were do you see the feedstock in the longer term, clearly no palm oil, but what do you see as the right mix between waste and biomass that does not compete with agriculture? And do you think you can expand it further in the longer term? And is the main constraint there the feedstock or rather the processing capacity? Thank you.

Claudio Descalzi -- Chief Executive Officer

Thank you Michele for the first question. Francesca is going to answer and then I'll take over for the second one.

Francesco Gattei -- Chief Financial Officer

Thank you Michele. Yes, you are right. You are let's say, touch the different level of speed of which you plan. So one in absolute value and the one in let's say intensity and what we can say clearly that we started with different assumptions versus last year. First of all we have a lower production profile. We will reach 2 million barrel per in at the end of plan, 2.1 in 2025 and that will be the level that will plateau with that flexible fluctuations that we described last year. So it is practically 10% lower and that you are also right that we have let's say a more conservative view on LNG growth. So that is the first step what you could assume in the beginning in the early part of the transformation phase, then you start to add additional component, the biorefinery was speeding up, there was the biogas that was also introduced to announce our missing bio products sold all to the domestic market. In the mean time we are growing the component that is related to the intensity. So once we have a continuous growth in the renewables side, once we have starting up the hydrogens, all these component will reduce that second element of the of the plan. So I think this is the way to look to the trend of the intensity and the absolute reduction.

Claudio Descalzi -- Chief Executive Officer

Thank you Francesca. Michele, you touched a very, very critical point and something that we started working on three years ago when we change our technologies to be able to be a palm oil free in 2023. Clearly there is a mix of the two component. What we said during the presentations in the plan, we are going to increase the second generation feedstock. So what we are now at the 20%, we are going to reach 80%. That is something that we're going to acquire, to buy and we already plan and modeling the acquisition of these feedstock. Clearly in the long-term, we want to reduce our cost and what we are working on the agriculture because clearly agriculture in the future for the biorefineries will be like the fuel for the upstream, the reservoir for the upstream and so we are working and we are testing for example castor oil in Tunisia and also in Italy in the last couple of years when we are testing our technology in Gela really to using a different kind of feedstock for -- instead of the palm oil. So after the plan growing and really with the agreement in Italy and in North Africa, in other country in Africa, where we are going to promote agriculture for these kind of -- that is a first generation. But it's not in competition with food. And one example was customer, we're going to increase it. So we are going also to our end-use -- we are going to reduce the cost, but absolutely, we are going to have sure feedstock for the future because what we think that we are going to have competition on the biofuel. So that is something where we're not just we are working, we are already modelling and we have solution for the future and what we see in that when we are going to increase the first generation we are going to reduce our cost.

Michele Della Vigna -- Goldman Sachs -- Analyst

Thank you.

Operator

Next question is from Mehdi Ennebati with Bank of America. Please go ahead.

Mehdi Ennebati -- Bank of America Merrill Lynch -- Analyst

Hi, good afternoon. And thanks Francesca for the presentation. So two questions from me please. First one on the dividend policy that you explained and let me give you an example. So imagine that in July, we consider that this year the oil price will be $60 Brent. So you will be pegging at $0.75 dividend and adding a share buyback. If next year, the Brent goes back to $60, $65, I wanted to know what you tend to do. Will you follow your dividend policy, meaning that you will lower the dividend or will you try to at least keep the dividend at the same level of last year? I'm asking because market you know the market tends to -- we want the company which are able to provide a stable dividend when the oil price of the hydrocarbon prices go down.

And then second question is about Versalis. So during the presentation, you talked about the circular economy, about the bioplastics. But I would like to know if you intend during your 2021 2024 strategy to try to make Versalis profitable. Because that company had been losing money since 2017, if I am not mistaken. So why -- why is it too difficult -- so difficult to convert Versalis into a greener company able to generate profit as you did with your two loss making refinery in Spain? Thank you.

Claudio Descalzi -- Chief Executive Officer

Okay. I am going to answer two questions. First of all, dividends. I understand the questions clearly, we build this kind of -- and we improve the policy to give a clear path linked to a fixed variable and a fix fixed floor and a growing floor and the variable that leaves linked to the price. What is happening [Indecipherable] then it is going down. Clearly every year in the first six months, we make the assessments of the price, but clearly we don't, we don't change without a reason and we don't change immediately. Also in July, we are going to decide what will be the average price of the years, but clearly considering all the difference situation we don't jump if there is a peak, we don't go down if there is just -- there is more down in the price. So everything will be an average and we'll be very attentive to make -- to make changes that can create difficult situation horizon for us and for our investors. So we -- what we want to do also with this is program to give stability -- that give ability because we anticipate our share buyback and we anticipating the share buyback, we are giving stability and we anchor to a lower price, you have to consider that when we talk about the developing plan means that we are, as we said, we are working and we succeeded till now to reduce our cash neutrality. Reducing our cash neutrality, then at the end of the plan would be lower than $40 per barrel. That means that all our policy is going down. So we're going to anchor if we are succeeding, but clearly we are so focused on that. We are anchor the floor to a lower level. So it's not just -- we don't have to just to watch the price -- the oil price trend, but we are also to watch out what we are doing in signing the company to renew the cash neutrality because reducing the cash neutrality. That is a big improvement for the dividend. So that is what I can say about the dividend.

For Versalis chemicals, through the last year what started in '17 Versalis was always in a difficult situation. The first action we made was really to go through the business line and increase the specialties to be a little bit far from the fluctuation of the feedstock that is very expensive, because Versalis is not linked to the downstream. And the downstream does not linked to the upstream. So we have to import, so for that reason we try to increase from some percent to more than 30%, improve the market and be on the value chain on the specialties. In the last two years, we work to change our -- transform our technologies and what I gave as example -- as example is what we're going to develop in the next couple of years where we want to bring Versalis through different kind of business combinations that are green chemicals as you said and recycle to add a breakeven and also to improve not just in the breakeven, but also to make some profit. So we are -- we are focused and we are finding synergies with all the biorefinery that we saw the bioproduct from refining that we're producing that in some cases is going to be and easily because we already tested a feedstock for the chemicals. So we are linking on the green side with green bioproduct refining and chemicals, and that will be the future. So it's not just a hope that from a technological point of view, we work a lot in the last couple of year that will be the way to transform Versalis and get a positive result.

Mehdi Ennebati -- Bank of America Merrill Lynch -- Analyst

Thank you very much.

Operator

The next question is from Alessandro Pozzi with Mediobanca. Please go ahead.

Alessandro Pozzi -- Mediobanca -- Analyst

Good afternoon and thank you for taking my question. The first one is on production. I think the share of gas production, the new target is over 90% in the long-term. I was wondering if can quantify long-term for us? But also I was wondering whether this was done by design because increasing oil volumes is no longer consistent with the CO2 emission targets? And the reason I'm asking is because we probably are going to see meaningful deficit in oil supply by the middle of decade. I guess investing in conventional oil development is becoming something too difficult to do for oil companies as you move in the world. So I was wondering if you can maybe give us an earlier view on this.

The second question is on the recovery fund, has been approved in Italy. I was wondering whether that could be -- could present some opportunities that are there, some consolidated in various projects. I know that they have been and has not been included there, but there may be other and I was wondering, if you can give us maybe bit more color there?

And also finally, an update on Mozambique and where we are with the investment decision? Thank you.

Claudio Descalzi -- Chief Executive Officer

Hey, thanks Alessandro. So I'm going to answer the two first questions and then Alessandro Puliti, our Natural Resources MD is going to answer the last question on Mozambique. So for production, I -- when I put in the long-term, clearly you want to know what is the long-term. Before the long-term was the last decade, 2040 to 2050. Now, I didn't want to say exactly the date because I want to have some flexibility. Just to recap the -- our policy that we set last year, which is almost the same. We said that we are going to reach RP production in 2025 that remain the same. But after COVID we reduced the amounts of production that we get 2025. Because before we added value of about 2.3 something -- about 2.3 million barrel per day, now we have at least 200,000 barrel less, and what Francesco said before also to explain why our level of emissions go. So in -- until 2030 we are going to have a ratio that is about 50-50 at 2030, where 55% gas and the 45% oil. But clearly there is a different kind of shape on this profile because most of the big discovery we made in the last three years, four years are giant gas field. We discover some oil, some discoveries but with a different kind of profile in term of ramp up accretion are very short time to market and also very short life. So oil is going to have a different kind of lifetime. Gas is longer because we are talking about giant. And I think that it is possible, which will be instead of in 2040, 2050, the switch -- big switch between gas and oil will be 2030, 2040. For that reason I talk about long-term, but is because also looking at the upstream time-to-market is the medium-term, but that is I think, I think the answer your question.

Recovery Fund could be a good opportunity for us, especially for the transition. We have several projects that are linked to CCS and are linked to our other development in the retail, in the marketing, the biorefineries and the waste to fuel, organic and inorganic waste to fuel. So we have a separate project we didn't put any kind of recovery plan funds in this plan. So the recovery plan that I'm sure that will start sometimes this year will be an upside and that means that we have the same kind of project and the same set of project, but we can accelerate in all transition especially in Italy. We can increase and accelerate the transition in the biorefineries, waste to fuel and NCCL. That will be the results of the recovery plan.

So now Alessandro can answer to the question about Mozambique.

Alessandro Puliti -- Chief Operating Officer Natural Resources

Okay. Regarding Mozambique Rovuma LNG, the FID was originally planned during 2020 and it has been postponed. The operators are currently working and looking for synergies with Area 1 development and also looking for all possibility to reduce cost analyzing the new market condition after the -- after the pandemic. So we will expect to update on the FID date during 2021 when these exercise of cost optimization will be completed.

Alessandro Pozzi -- Mediobanca -- Analyst

Just to clarify, do you expect the FID by the end of this year or it still a moving part?

Alessandro Puliti -- Chief Operating Officer Natural Resources

On the results of the cost optimization exercise.

Alessandro Pozzi -- Mediobanca -- Analyst

Thank you very much.

Operator

The next question is from Irene Himona with SG. Please go ahead.

Irene Himona -- Societe Generale -- Analyst

Thank you very much. Good afternoon. My first question concerns the fact that you appear to be revisiting the dual exploration model after a pause, is this specifically budgeted for in this plan? In other words, is the specific target perhaps for monetizing your [Indecipherable] excesses? And then my second question concerns the merging of renewables generation with retail. Clearly, retail, especially for green power, is a very competitive marketplace. Is that the reason you are merging the two. Can you talk about the synergies? And in a market that is becoming very, very competitive, how do you -- how can you ensure growing value from that business? Thank you.

Claudio Descalzi -- Chief Executive Officer

Thank you. For the first question, Francesco will answer the first question. Then I will talk about the business -- I'm talking about the business combination. So Francesco.

Francesco Gattei -- Chief Financial Officer

Yes, Irene. About of the disposal, you saw that we -- we are targeting EUR2 billion along the four-year plan. In this EUR2 billion there are different kinds of assets. There are mature assets, there are logistic assets, there are certain, let's say stake in project and larger projects, there are clearly also the continuing of the dual exploration model. You know that in the recent years, we had a very successful results in some areas and with high stakes like Mexico, Indonesia. So these are the kind of opportunity that could be, let's say part of this process of dilution. And clearly we are continuing to explore and discover. So this is a model that we will continue to satisfy our of our investor and our cash. Thank you.

Claudio Descalzi -- Chief Executive Officer

For renewables, business combination renewables with gas and power with the client, the customers. Renewables are clearly a very tight market. So there is a lot of competitions and competitions for the prices, for the market, and if you just renewables is not really market penetration. We are really seeing that putting together our renewables with our Eni gas e luce retail market is going to really to be a very important factor to fight the competition. We have had other factors clearly, but that is very important because you -- you remain, you are along the value chain, so you produce the energy and then you can sell the energy with your company. And you can keep all the value in inside Eni, inside this new entity. Then we -- these are the factor. How to increase renewable, that -- it is clear that we want to put together the two activities. So we have Spain, we have France, we have Greece these and we have Italy. In Italy, we have another important competitive factor that we have land. We have land as Eni on reclaimed land and now we can use about 3,000 hectares that we have at our disposal. We just use a very small percentage, less than 10% for this first phase, but we can really increase and we can feed our company, a retail company with this energy. And for the future, as I said, our -- which is our aim is to really to sell our pro -- our -- to our customers all set of decarbonized product. So we want to take all the scope 3. That just give big competitive advantage to our Eni gas e luce. Because that will be in the future area strong point to attract more customers and remain on the value chain and new the bigger spread of customers that we have, we have almost 10 million now. So we are going to in a couple of years 11 million organically. So with a very low cost and we increased [Indecipherable]. So this kind of combination as a -- as a new really company can have a very important multiple in the possible future. So it's really something that is going to extract and create big value that is now inside Eni is going to be diluted. So that is part of a very important phase for that reason, I said we have net zero to 150. We have this important point that is a really important [Indecipherable] that can give a huge value to any.

Irene Himona -- Societe Generale -- Analyst

Thank you very much.

Operator

The next question is from Thomas Adolff with Credit Suisse. Please go ahead.

Thomas Adolff -- Credit Suisse -- Analyst

Hi, good afternoon. Thanks for taking my question. So my first question is on your refinery and biofuels plans, obviously you're planning to grow it to 2 million tonnes per annum, is this driven by refinery convergence? And how should I think about the Italian refinery by 2030? Obviously you mentioned in the past that by 2050 or so, there are no oil refineries left in Italy.

And then secondly, just going to slide 19 where you show the earnings growth from biorefining marketing and then oil refining, and I just wanted to get a better feel the significant growth in earnings and biorefining and marketing. You assuming some margin expansions, other than volume growth on the back of cheaper feedstock. So any color on that would be great? And then finally, if I may on Slide 13, you've talked your target for installed renewable capacity. How should we think about the power, the total power sold to your customers? Some of your competitors have much higher number than the equity installed capacity. Thank you.

Claudio Descalzi -- Chief Executive Officer

Thank you. So I -- we try to cover most of the question then Pino Ricci, the in charge of Energy Evolution is going to complement also Francesco, if you want to add something. So the growth, where we are going to grow in our biorefinery. Clearly, we really -- we reach a good experience in conversion because we converted two standard refinery in Venice and in Gela. So all the processes and all the industrial transformation is well known to us. So we have, as I said during the presentation, we have under study, a possibility of an additional conversion in Italy. But we have also a discussion to build new one in the US, we can -- we can talk about that because, is it possibly -- we have also possibility to do both. So the convention is likely to happen before 2030 because as you said, I think by 2040, we have to transform or shutdown the traditional refinery. So that is clearly in the plan. We are thinking what about the third one or possible other two that is not included in the plan before the end of this decade. So I think that in the next months, we're going to decide what to do, I think before July we will be in a position to say where we're going to build the new one. Pino, if you want to say something about the possible optimization in term of returns with the price optimization, cost optimization in the biorefinery in the future.

Giuseppe Ricci -- Chief Operating Officer Energy Evolution

Thank you, Claudio. About the biorefinery, as you know the rate of return of the -- the internal rate of return of biorefinery is very high, it goes to 15%. So it is very profitable. And our original model to have the brownfield converting existing refining biorefinery allow us to reduce drastically the capex and increasing the profitability. And now the further driving force to improve the profitability of the biorefinery is to shift the feedstock from the third generation that we consider on the year that will be less profitable through waste and residue that are more profitable for the biorefinery. In fact in our plan, within 2024, we will reach almost 80% of waste and residue that we call the second and third generation feedstock. The last point is the diversification of the market. Now we are covering especially the European market, but we are diversifying our marketing through USA and North Europe with specific quality of the product. And last but not least, the product itself. Now we are producing mainly HVO, hydrogenated vegetable oil that is mixed in the diesel. But there is a very good opportunity to speed up the decarbonization of transport using HVO 100% of pure because of the -- in this way the decarbonization will increase four times, five times versus a mix according to the European law. And last, but not least, biojet. The biojet will be the future. We'll be opening a tremendous market. If we consider that pre-COVID marketing of aviation fuel is 350 million tonnes per year. It's enough [Indecipherable] of replacement with biojet to increase the market and also the marketing.

Francesco Gattei -- Chief Financial Officer

The group earnings is a combination of substantially of two elements. One is a growth, that is a steady growth in the marketing side, that is substantially 150 million along the planned period. The remaining component that will be build up at the end of the four year plan once we will have the completion of the project in Venice and the start-up up of the new plant, the new refining, the new biorefinery and you will have an additional contribution on the side that is substantially adding another EUR150-200 million in term of EBITDA. So that are the two factors that explain the growth of the earnings along the play. [Foreign Speech].

Claudio Descalzi -- Chief Executive Officer

Sorry, everybody was waiting for my answer. I forgot the question. So one thing we can say that by 2030 we will be able to deliver our green electricity at the level of about 35%, 40% and by 2040 we can deliver to our customers and the percent of our electricity that what we have put in our plan.

Thomas Adolff -- Credit Suisse -- Analyst

Thank you very much.

Operator

The next question is from Jon Rigby with UBS. Please go ahead.

Jon Rigby -- UBS -- Analyst

Thank you. Good afternoon, everyone. The first question is just talk about CCS. I mean you're moving forward quite quickly on that. I imagine that it will be sort of integrated or integral to your E&P strategy. So two questions, when you think about the cost of it, are you including that or will you include that within your opex expectations and is that starting to appear by the middle of the decade? And also say strategically when you think about your portfolio will you be looking to sort of concentrate your activity into areas where you could be both producing and capturing carbon I guess simultaneously or in proximity to each other. So that will be a sort of guide to your strategy in the upstream?

And then if I could just switch gears to financials, I think Francesco, you did mention something about balance sheet gearing, unfortunately we had a bit of breakdown in the conference call. So can you just go through what your expectations are for the balance sheet? I think you've mentioned hybrid, but do you also sort of reflects the balance sheet slightly differently going forward with the knowledge that you are going to be carrying I guess increased off balance sheet funding for some of the special vehicles? Thanks.

Claudio Descalzi -- Chief Executive Officer

I will answer first question and then the second one is for Francesco. So for our CCS, you said right that we are linked to upstream, because our CCS is linked to the depleted reservoir and we have a lot of reservoir depleted in Italy and we have also a lot of hard to update activity or industry or plants in Italy, but they are closed fortunately to our depleted reservoir. When we talk about the 500 million tonnes increase that in a subset of the whole potential that we have in the Adriatic and then we have a Mediterranean Sea. So really we have a huge potential. So the cost is very low. Now we are working, as you know we are working in Norway. We are working two big project in UK. Then we have Abu Dhabi, Libya, and in many storage and we capture sour gas, we have been down there for a long time. So the cost is not very high, because we have everything. We have the platform, we have the pipes, the floor line, the wells, we just to be completed well and the cost is really linked to the connection with the chimney [Phonetic] of the power plant or the chemicals plant or refineries. So it is really very competitive. So when we -- how we can treat this this cost. Really we cannot treat as a operating costs overall because we are growing is not just for us, we are going also to give a chance also to other hard-to-abate activity. And that is in any case became revenue. And we have to look at that against the carbon tax or the carbon pricing. Clearly we have expectation that the stocks or carbon price is going to increase as in other non-European country. So what we can say that our cost in generally because we are working on depletion reservoir is very, very low and can be compared well in some years or be much better than the current. So that is becoming creating an upside potential that we didn't put clearly in the plan, but that is another possible upside potential.

Then we have the development in other area where we have practically the necessity to be able to produce to capture this year to the sour gas, but that is linked to, in this case, we consider this cost as operating cost that is in upstream and upstream activity 100%, but that allow us to produce reducing and that is one of our target, the reducing the carbon footprint of our upstream activity. Thank you.

Francesco Gattei -- Chief Financial Officer

About the leverage we have now leverage in the range of 30%. We are assuming that this leverage in $50 order this -- this year in 2021 will remain substantially very close to this level, but then we will decline. It will decline to 20 or lower 20 if we follow our scenario assumption or it will decline around 22%, 23% if we assume the flat $50. So that is the secret plan. Then, as you have mentioned, there are opportunities and the business combination as we did for Var, a way to create financial vehicles which are stand-alone able to self-finance themselves to collect debt leverage in their balance sheet through different tools and therefore to consolidate this amount of debt. So that will be further lever to reduce the leverage which we are assuming in the plan.

Jon Rigby -- UBS -- Analyst

Thanks Francesco.

Operator

The next question is from Massimo Bonisoli with Equita. Please go ahead.

Massimo Bonisoli -- Equita -- Analyst

Good afternoon. Thank you very much. Two question on M&A. Some color on capacity expansion on renewable, how much may come from M&A in that business. On Slide 24, you presented the IRR range for renewable project and it seems to reduce the M&A opportunity in that cluster. The second question on M&A is regarding Australia. If you have any update on the disposal of those assets? And a third question if I may, an indication of the contribution from Damietta LNG in '21 and '22?

Claudio Descalzi -- Chief Executive Officer

On M&A, really once you want to grow we've got the speed that we presented mostly not in four-year plan because four-year plan we have a lot of organic opportunity. We can anticipate that on an inorganic opportunistic acquisition to speed up the bulk of the growth that we decided in our four-year plan is in our hands. Clearly what is important that to reach the 15 gigawatt in 2030, probably you should think something related to M&A. What we want to do is clearly to lever on our capability of M&A try not to overpay. So we could for example acquire opportunity where we have existing activity. For example, we could have some fiscal losses that could offset the cost that we paid for the acquisition or we have additional synergy in the country where that could also justify the component of premium. We clearly have not interested to rush together with let's say 100 of different the competitors for collecting gigawatt. So that is the first question.

About Australia, Australia the process was completed. The offer we received were not matching our say selective request. And actually we decided not to sell -- not to sell our Australian assets. So that we are not forced to collect the cash if this is not matching our expectation. Then the last one is about [Indecipherable] OK Damietta plant was restarted during the month of January. It has already produced the LNG in enough quantities to load the first cargo in the very next few days. So our plan is to well within in production throughout the year, especially clearly during the winter period 2021, 2022 and also in the winter 2022, 2023 and they will contribute to certainly increase our ability to export LNG and in directly to the production from Zohr that has already reached the record level during the beginning of February of 3.2 Bcf per day.

Massimo Bonisoli -- Equita -- Analyst

Thank you very much.

Operator

The next question is from Martijn Rats with Morgan Stanley. Please go ahead.

Martijn Rats -- Morgan Stanley -- Analyst

Yes, hi. Hello. I have two if I may. First of all, I noticed that year-over-year the fourth quarter for fourth quarter, your production levels are down about sort of 11%, which is -- which is turning out to be precisely the average for all of your other European peer. So in that sense, it's probably not a surprise, but these declines are so large that they -- that they are almost so have macro implications. Eni alone lost a little over 100,000 barrels a day of oil production. And I was wondering if you could give us any sort of insight into how quickly this could come back, if oil demand sort of picks up this year. How easy it is for you to reactivate this production and ramp up as demand comes back? That's one.

The second question may sound a little sort of technical, but I'm very interested in nonetheless, it regards the dividend payout and the split between the interim and the final payments, the May and September payment, and the previous guidance was that the base, the floor dividends would be split 50/50 between the May and September dividend and that the variable component would entirely be paid in September. But Francesco just listening to you about sort of 15 minutes, 20 minutes ago, I noticed that you something along the lines of the entire dividend will now be split 50/50 between the May and the September period. And I just wanted to ask you if you could confirm that there is indeed a change in how the dividend is paid out? And I was -- I also wanted to ask you sort of why that is and I sort of how you came to this decision?

Francesco Gattei -- Chief Financial Officer

First of all, about the production. I think that you have to take into account there were value change. One was let's say a change in the trigger of Libyan PSA that was explained part of the variation between that quarter and the new quarter and the last quarter. And clearly, there was all the effect of COVID. So there was the OPEC cut, demand of gas, there was also the slowdown of activity of infilling and therefore are two quarters that are completely uncomparable in term of production. Then I turn back to --.

Claudio Descalzi -- Chief Executive Officer

Just to make some other comments about production. What we have switched off clearly is what Francesco said it is the in filling. In filling and all the near-fill activities and we have a -- we can transfer trigger that is a big part of the Libya production. So what we have switched off clearly now we can restart and not overnight. So what we are seeing that it's a going to take six, seven, eight months to -- if the prices is the right one and it became the costs and prices will do want to start to reinvest in the stop -- go and stop it, it is not possible but we can restart getting for in 2022. So if we start in three months, four months we can reactivate the 60,000 barrel per day on average. So for the year. That is the quantity for 2022, end of 2021 we can reactivate.

Francesco Gattei -- Chief Financial Officer

About the dividend split that you are right. This is a variations versus last year. Clearly we made different variations, so we changed the floor level, the floor reference for price. We anticipate buyback and we introduce also this change. And we continue to follow to improve this dividend policy. Clearly what we decided was to define a policy that is even clear also receiving the feedback from our clients. We -- this year we are already paying a two-thirds of the dividend -- of the dividend the floor that we announced in September showing to me, we will have the two-third while we prefer to have whoever equal split between the two component in the next. And clearly, all these has to be read together with the new policy and the new price reference [Indecipherable] work that these are clearly much different while we were expecting one year ago. So I think it is a part of an overall policy that is much more generous toward our investors.

Martijn Rats -- Morgan Stanley -- Analyst

Okay, wonderful. Thank you.

Operator

Next question is from Bertrand Hodee with Kepler Cheuvreux. Please go ahead.

Bertrand Hodee -- Kepler Cheuvreux -- Analyst

Yes, hello everyone. Thank you for taking my question. Two if I may. Can you give us some color on your 2021 production in terms of underlying assumption. What is your expectation in Libya? Can you also give us what is a negative impact from OPEC plus quota on an absolute basis and also what is the positive impact from Damietta restart? Because you mentioned that Zohr is now at full capacity 3.2 Bcf, where it was well below that in 2020. So do you expect Zohr to keep our full capacity, 3.2 Bcf for 2021? And then my second question is on LNG, Qatar Petroleum as just sanctioned the massive 73 million TBA expansion. Have you begun any discussion with QP on possible participation in the -- on one of the four mega trends and what kind of stake would you be considering? 30% of 8.2 million ton, is it the possibility in your view? Of course, if the terms are right, but when we take this kind of [Indecipherable].

Alessandro Puliti -- Chief Operating Officer Natural Resources

Talk about production in 2021 and the impact of the near term on production. Okay, regarding 2021 production and remark more color on Libya, Libya will account in our production for around 163,000 barrels of oil per day throughout the year. Here we are account to the -- accounting clearly the full recovery from the force majeure on the land fields like [Indecipherable] that are now back in normal production. Regarding the OPEC cut. Yes, we accounted for around 36,000 barrels of oil stopped by OPEC cuts around various countries. And regarding Zohr, Zohr as I said before, production record of 3.2 Bcf per day. We are assuming throughout the year, since we expected during summer reduced gas demand a lower rate. So we expect to average 2.7 Bcf per day average throughout the year for Zohr during the entire 2021. Nevertheless this is much more than the 2.1 average that was done during 2020 were gas demand especially in Egypt was deeply depressed.

Claudio Descalzi -- Chief Executive Officer

Thank you Alessandro. For Qatar, we have been discussing with QP for at least for the last three year, four years. So clearly, we have interested. We think that is a good project and now that they disclose as you know the capex for the investment that much less than what we forecast at the very beginning. So they really -- they have been able to finalize very good contract. So we depend -- it depends on conditions. We are interested, I can't tell you exactly which kind of percentage because it's is not really not just announced, but also on QP and we will see next month, next week or next month what is going to be the tender and we have been, as you know, qualified. So we are just waiting. We show interest and we'll see in the next future what is going to happen.

Bertrand Hodee -- Kepler Cheuvreux -- Analyst

Thank you very much, very clear.

Operator

The next question is from Oswald Clint with Bernstein. Please go ahead.

Oswald Clint -- Sanford C. Bernstein -- Analyst

Thank you very much everyone. I'd like to just -- as we walk through this plan and get to the end of it in 2024, I wonder if you could talk around return on capital employed, expectations? You're going to get up over $60 in your plan, and I just wanted to compare that back to 2019, where we also had those types of commodity prices and return on capital employed at Eni was around 5.3%. So we've got a lot more green capex coming through here at 20%, but it's organic and you talked about margins; upstream returns look strong and similar. But as you boil all of it down can you talk about what ROCE, return of capital you might be expecting to generate in 2024, please?

Secondly, just a bit more broadly talking about low carbon products and you've talked a lot about those during the presentation, but could you talk about pent-up demand for such products? I mean you've spoken a lot about retail. But I'm interested who and what will Eni sell it in the industrial segment, in the commercial segment or which airlines, which IT companies that we're seeing some of your peers start to strike big contracts into. Could you give us some examples of those types of deals that may be possible? And then even in your -- on the technology foundation Claudio you spoke about, you mentioned enhanced customized services that part of the business can offer. Could you flesh that out or talk a little bit more about what exactly that is, please? Thank you.

Claudio Descalzi -- Chief Executive Officer

Okay. So, Francesco you can answer that, the capital, return on capital question.

Francesco Gattei -- Chief Financial Officer

Yes, at the end of the plan, it is true that we are comparing a similar price level, but we are comparing a completely different capex structure. Whilst you were referring the 5% return on capital of $60 you were thinking a world where we were investing $8 billion of which $7 billion substantially upstream per year. Now, what we are going to do is to invest the less than $7 billion per year and which less than $5 billion in absolute. So the return on capital will be higher, will be closer to 9%, 10%. So that is a completely shift in term of returns. We are investing in short cycle project, we are investing in less intensive capital project and we are seeing maximizing return off of the upstream activity. In the meantime, we are also investing in the higher return bio-refineries and in the renewable side. As we mentioned, we have just 20% of inactive capital along the planning, that means that the amount of investment along the plan that will start to deliver cash flow after the plan are adjusted 20%.

Claudio Descalzi -- Chief Executive Officer

Okay, about demand of new product. So we have to say, it's very clear about retail. So our customers, we have a large amount of customers. So all recognized products. When I talk about the galvanized product we talk about green product, we talk about also green products because in the first phase at least for the next 15 years, where we have our power plant and we have also our refineries. We are going to recognize products, group products that go through every case, then we have big clients for Eni because our recognized product, I talk about hydrogen, so the blue hydrogen. We are the first producer and the fist consumer of hydrogen and this is an activity with a very high CO2 emission. So we are the client to ourselves for all the blue hydrogen. Then we are also talking with big [Indecipherable] industrial demand, especially in Northern Italy where they required about services for the carbon capture. Some industry is also interested for the hydrogen clearly not at the moment the green hydrogen because too expenses. But our blue hydrogen is very close to what you say the gray hydrogen that we produce with our gas because our CCS is very, it's very, we can say cheap. So that are the possible issue of our decarbonize product. For the, I mean you have other [Indecipherable]?

Francesco Gattei -- Chief Financial Officer

And out of the bio-product, bio-fuels, HVO and bio-jet. The demand must increase because are increasing the target of the carbonization. The Europe target to reduce CO2 emission within 2030 from minus 40% to minus 55% allow us to increase the market, otherwise there is no possibility to reach this so important target. Then about bio-jet where there are no -- clear low like the biodiesel. This is an improvement movement that is increasing -- is involving a lot of countries in particular there are the International Association [Indecipherable] that is pushing to put rules for the international airplane travel to push it to have at least 2% of bio-fuel in the jet fuel within 2025. But this percent could improve as when all the companies put to the target of the carbonization effect. In the airplane there are only two way to reduce the emissions. One is the efficiency of the engine and the ergonomics. The second is the fuel. And there are no alternatives to bio-fuel in the mid-short time.

Oswald Clint -- Sanford C. Bernstein -- Analyst

That's excellent, thank you.

Claudio Descalzi -- Chief Executive Officer

For the last point concerning digital for our services. So I'll try to be very brief. What we are working on we are already creating common data base and especially services for our clients. It's not just talking about the any [Indecipherable] retail customers but we talk also about our marketing. So oil marketing and we are linking together to really to cross -- creating cross services and increasing the weight of our customers on the two branches. And that is made through digital application and digital up. So that is what we, one of the things I meant during the presentation. Then we have other kinds of services for each kind of activity that is improved by digital and that is something that to improve services and to increase organically the number of customers. This year that was a very difficult year, organically we grow about to increase about 400,000 customers. So I think that these digital back [Indecipherable] was very successful.

Oswald Clint -- Sanford C. Bernstein -- Analyst

That's great. Thank you.

Operator

The next question is from Peter Low with Redburn. Please go ahead.

Peter Low -- Redburn -- Analyst

Hi, thanks. Just on upstream you're targeting a 4% reduction CAGR over the planned period. In the past you've not always met your production targets. Can you give an indication of how much contingency is in the plan and perhaps where you see the risks to meeting that? And then secondly, on slide 19 you're showing a positive contribution in 2021 from refining. To what extent is that dependent on a recovery in margins? The refining business looks like it was significantly loss-making this year [Indecipherable] and ADNOC so I'm just trying to understand where the problems in delta comes from? Thanks.

Claudio Descalzi -- Chief Executive Officer

Francesco [Indecipherable] production in upstream and then about margins, margin in R&M.

Francesco Gattei -- Chief Financial Officer

Okay. Regarding 2021 budget, we carry out around 27,000 barrels per day of contingency and this is accounting also the fact that we have also included contingency in already for opex reduction as I said before, that this goes on top of that 37 barrels that is already -- 12,000 barrels that is already been deducted for OPEC cut.

Alessandro Pozzi -- Mediobanca -- Analyst

Yes, about of the expectation on refining margin, we know that the 2020 as being the most tremendous year of the centaury for the consumption of transport before for the refining system. We expect to have a recovery in 2021 and we expect the margin below $4 per barrels this year that could increase a little bit in the following years. But in any case in this first part of the year, we are still in softness because of the winter, because of the COVID pandemic, because of the fall of the consumption. But we expect because of [Indecipherable] because of the overall necessity to grow in the economy that starting from March from the spring margin consumption and margin could recover. Our reaction would be the same of last year. We're pushing on efficiency optimization of our asset and synergy between refining, trading, supply linked with also our equity crudes. We try to optimize the very -- every scenario.

Peter Low -- Redburn -- Analyst

Thank you.

Operator

Last question from Henry Tarr with Berenberg. Please go ahead.

Henry Tarr -- Berenberg -- Analyst

Hi, there. And thanks for taking my questions. Two really, I think just to come back on the biorefinery side, I think you talked about potentially 80% of the feedstock being waste in residues by 2023. Have you started to secure this waste in residue at this point? I mean, I guess the main source is used cooking oil and animal fat. The pool of resources for these doesn't seem to be growing quickly in Europe. The demand is increasing quite sharply. So it'd be interesting just to know how detailed your plans are there already? And then secondly in terms of the renewable build-out, are you looking for PPAs to facilitate and finance the new capacity or are you looking to sort of essentially cover your retail position with the new capacity? And how do you think about balancing the PPA versus merchant exposure? Thanks.

Claudio Descalzi -- Chief Executive Officer

Okay. So [Indecipherable] answer about de-stock. The answer is yes. So in the second because.

Alessandro Puliti -- Chief Operating Officer Natural Resources

Our target to meet 80% to [Indecipherable] due by 2024 is due to the fact that we have a very robust worldwide trading and we have recognized that the developing initial this product, a large collection project [Indecipherable] and other waste is worldwide around 35 million tonnes or more than 35 million tonnes. Our strategy as, Claudio said before, is to add to the trading also the internal developing of this collection of these feedstocks also through vertical integration in order to securitize better the feedstock availability.

Francesco Gattei -- Chief Financial Officer

Okay. About the renewable and the way to secure the finance and the growth, first of all in our renewables activity we are already 20% as opposed to March. So to market and the rest is related to PPA or a contract that could be incentivized or could be, let's say, renewed following the recent tenders. So this is the situation today. In the long term we want to reduce even further to also 15%. The amount is post to market the but actually we have to join together the retail with our renewable is another opportunity to hedge and to cover the eventual the potential risk internal market of power prices. So that is path. Clearly in term of growth, opportunity of growth by leveraging financing tools that are quite let's say king to support this development clearly we will pursue and the possibility to combine together this entity so a stronger cash generator, and a growth component. It will be an opportunity to improve the capability to grow and to use financial lever. Okay?

Operator

Mr. Descalzi that was the final question. I turn the conference back to you, sir for any additional comments.

Claudio Descalzi -- Chief Executive Officer

Thank you very much. I don't have any additional comment. We talked for two hours. So I think that is OK. Thank you very much. Have a nice day.

Duration: 111 minutes

Call participants:

Claudio Descalzi -- Chief Executive Officer

Francesco Gattei -- Chief Financial Officer

Alessandro Puliti -- Chief Operating Officer Natural Resources

Giuseppe Ricci -- Chief Operating Officer Energy Evolution

Michele Della Vigna -- Goldman Sachs -- Analyst

Mehdi Ennebati -- Bank of America Merrill Lynch -- Analyst

Alessandro Pozzi -- Mediobanca -- Analyst

Irene Himona -- Societe Generale -- Analyst

Thomas Adolff -- Credit Suisse -- Analyst

Jon Rigby -- UBS -- Analyst

Massimo Bonisoli -- Equita -- Analyst

Martijn Rats -- Morgan Stanley -- Analyst

Bertrand Hodee -- Kepler Cheuvreux -- Analyst

Oswald Clint -- Sanford C. Bernstein -- Analyst

Peter Low -- Redburn -- Analyst

Henry Tarr -- Berenberg -- Analyst

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