Strategy

The need for society’s decarbonisation has brought challenges to all economic sectors. Nowadays, it is clear that the way energy is generated, transformed and consumed will change, and this means shaping and adapting Galp’s strategy to present and future needs.

In 2021, Galp updated its strategy towards a resilient investment case in an accelerated energy transition. Galp aims to reshape its portfolio and become a dynamic, digitally enabled customer-oriented company, with a material position in renewables and new energies, and industrial operations being progressively decarbonised and transformed towards a green energy hub.

The Company’s strategy originates a value-driven investment case, which relies on a clear capital allocation framework, allocating around 50% of its net investments in the 2021-25 period towards low-to-no-carbon activities.

This enables Galp to reshape its portfolio, whilst maintaining its ability to deliver resilient cash-flow growth and a competitive shareholder remuneration, envisaging to distribute up to 1/3 of its operational cash flow.

The Upstream will continue to be one of the cornerstones of Galp over the next few years. Galp’s Upstream portfolio is based on top tier assets, both in terms of production cost and carbon intensity, delivering the right conditions to focus Galp on the value maximisation from core projects and not to pursue with new frontier exploration. Nevertheless, Galp aims to continue to deliver a peer-leading production increase, by delivering c.25% more to the current Upstream production capacity by 2025 from already sanctioned projects.

At the same time, the carbon intensity of Galp’s Upstream business is considerably lower than the sector’s average and Galp is committed to continuing to pursue carbon efficiency excellence to support the responsible growth of production.

Transforming our Industrial assets and other energy-related activities is fundamental to progressively adapting the Company’s portfolio to the unfolding needs of the market. This is why, at Galp, work is underway to decarbonise the Sines refinery, with the goal of transforming it into a Green Energy Hub. Along the way to decarbonising Sines, Galp is also committed to optimising refining efficiency and enhancing its resilience, ensuring the competitiveness of its industrial activities, while expanding the share of low-carbon products, such as advanced biofuels with HVO plant being planned.

Together with the low-carbon products diversification, the gradual transformation into a Green Energy Hub is also expected to be leveraged on the production of green hydrogen, which will allow further industrial and mobility applications, such as synthetic fuels, and support an operational carbon footprint reduction of approximately 50% by 2030.

Galp recognises the potential of hydrogen and is evaluating the development of green hydrogen solutions, coupling its privileged position to its industrial skills to move this new business forward. By 2025, the Company aims to control the first 100 MW of electrolysis capacity with additional capacity being planned up to 1 GW.

Galp’s Energy Management activities are at the core of our energy supply activities, ensuring reliable and competitive sourcing of raw materials and other energy products and the value maximisation of the sales of all produced and transformed products. Additionally, Galp will enhance the role of Energy Management in its organisation in order to obtain additional value from the integrated profile across the different energy value chains.

Galp holds a reference position as an energy supplier in Iberia. The response to changes in consumption patterns is addressed on a daily basis at Galp. The Company’s goal is to continuously support customers’ lives, both through a physical platform, with the convenience and proximity of its network, and through a digital platform, accompanying customers throughout their daily journey.

In this context, Galp continues to expand the customer experience, aiming to transform the current fuel stations towards innovative, multi-energy and convenience concepts, by modernising and expanding its products and services offered using a new hub concept. Within this scope, Galp aims to double the contribution of convenience in its retail network by 2025, together with a fast expansion of its offer of electric vehicle charging points, achieving c.10k in Iberia by 2025. At home, Galp aims to significantly grow the electricity sales to its clients, while maintaining a leading position in natural gas sales. Both in mobility and at home, Galp will continue to deliver the energy of today along with the solutions of tomorrow, leveraging decentralised generation and fleet management solutions, aligned with the energy transition.

As a One Galp, the Company will be able to deliver products and services tailored to both present and future needs while supporting its clients’ journey towards the decarbonisation and digitalisation of their consumption.

Galp intends to play an active role in the energy transition that society is facing, seeking to anticipate trends, develop a portfolio in line with future needs, establish synergies with its current business whenever possible, and progressively reduce the carbon intensity of its activity and its customers. In this context, Galp is building a renewable energy generation portfolio as well as innovating towards the development of new energies across the value chain.

In the renewables sector, Galp is already one of the leading solar PV players in Iberia, with c.1 GW in operation and 3.1 GW of projects under development, together with 0.6 GW under development in Brazil. By 2030, the Company is targeting a gross renewable operating capacity of about 12 GW, promoting an agile portfolio expansion based on a geographic and technological diversification. To promote this growth and support value creation, Galp will continue to maximise value through an appropriate capital structure, as well as a partnership model and asset rotation. Galp is also building some distinctive capabilities to enhance portfolio resilience, such as behind-the-meter battery storage options, technological hybridisation.

Regarding New Businesses, Galp is proactively looking into solutions that can play a key role in the energy value chain of the future. The New Businesses area is designed to serve as an incubator for new value creation streams, testing, validating, and developing concepts to a mature stage, which can than flourish on their own, or be incorporated by other business units, such as the green hydrogen that has recently been included under the Industrial & Energy Management area, as well as Galp Solar and GowithFlow that have been integrated in the Commercial business.

Galp is also assessing entry opportunities in the fast-growing battery value chain, capturing an early mover advantage in Europe. Galp’s joint venture ‘Aurora’ with Northvolt is engaged in the development of Europe’s first lithium conversion plant, to be located in Portugal.