Galp to permanently close Porto refinery

Portugal's integrated Galp will permanently close its 110,000 b/d Porto refinery next year and focus its refining activities and investments on its more modern 220,000 b/d Sines complex.

This is the latest in a line of refinery closures in Europe this year, as weak fuels demand leads to overcapacity and to financial losses.

"The structural changes in oil product demand patterns, driven by the regulatory context in Europe and the effects caused by the Covid-19 pandemic, have led to a significant impact on Galp's downstream industrial activities," the firm said. "The closure was on the cards in the medium term but the pandemic and the stepping up of the energy transition drive in Portugal has accelerated the process."

Porto has the lowest conversion factor of the 10 refineries on the Iberian Peninsula and has seen the most stoppages this year in response to the tightness in refining margins and the slump in demand caused by the pandemic. Galp halted the refinery's fuels units, including the main 110,000 b/d crude unit, vacuum distillation and catalytic conversion units, between April and July citing brimming inventories and weak demand, and again from October until at least the end of the year as crack spreads tightened again in September.

Fuels production will not restart before Porto closes for the final time. Galp kept the refinery's aromatics, bitumen and base oils units largely online throughout the two stoppages this year, and it is unclear what the future holds for these operations.

Galp will maintain product import, storage and distribution facilities at Porto, including its products terminal at the nearby port of Leixoes where the firm recently deactivated its single point mooring facility (SPM) for discharging crude from large tankers.

Galp expects the closure and decommissioning of the refinery to save about €90mn/yr in fixed costs and capital expenditure (capex). It plans to channel this into improving energy and process efficiency at Sines and to integrating production of advanced biofuels there to meet next year's blending mandates.

The firm said that ending refining operations at Porto and decommissioning of units with a book value of €200mn will cut its scope 1 and 2 emissions by 900,000 t/yr, but said it would not affect security of fuels supply in Portugal. Demand for road diesel in Portugal fell by 14pc year on year to 81,000 b/d in January-October, for 95 Ron gasoline by 18pc to 17,000 b/d and for jet fuel by 61pc to 14,000 b/d, according to the country's general directorate for energy DGEG.

By Jonathan Gleave