High taxes could hamper Galp investments in Portugal

Portugal’s high tax system could make it difficult for the energy company Galp to invest in decarbonising the oil refinery at Sines and develop a lithium refinery.

The company says that the decision to invest €650 million on greening up the Sines refinery was taken in 2023 providing it did not have to pay the Extraordinary Contribution on the Energy Sector (CESE)

Galp financial director, Maria João Carioca warned recently: “We hope that the heavy taxation that is levied on our businesses on the Iberian peninsula does not prevent us from advancing more quickly in the region”.

According to the business daily Negócios that quizzed a source, the large-scale investments that the oil and gas company has earmarked for Portugal, which stands at €650 million to decarbonise the Sines refinery, and around €1Bn to construct the lithium refinery at Sines in partnership with the Swedish electric battery giant Northvolt, could be at risk because of Portugal’s crippling tax regime, adding that “these projects depend on a balance between risks and profitability”, taking into account the costs of investment, financing and operation, market prospects, among many other factors.

“The fiscal and regulatory context could naturally have a decisive impact on accelerating or braking an investment decision”, admits Galp, confirming that the final investment decision in relation to the Aurora Lithium project — a joint venture between Galp and Northvolt for the lithium refining is supposed to move forward this year. “The project implies that this decision should be taken by the end of this year.”