In the Refining & Marketing business segment, Galp Energia integrates several components of the oil value chain, from procurement of crude oil to marketing of oil products to the final client. The Company has two refineries in Portugal whose refined products are primarily marketed across Galp Energia’s distribution network, which covers the Iberian Peninsula and part of Africa.
Strategy execution in the Refining & Marketing business segment is based on a refining system that, after the upgrade of both refineries, is better suited to the demand pattern in the Iberian market. The strategy of this business is also based on the optimisation of activities through streamlined operations, which is the path to greater effectiveness and higher return on invested capital. Stable revenues and cash flows from the Refining & Marketing business is another pillar of the Company’s strategy and one that is expected to contribute to funding and to the expansion of Galp Energia’s activities in its other business segments.
In 2011 Galp Energia progressed towards achieving its goals for the Refining & Marketing business segment. The capital expenditure in the upgrade project in the Matosinhos refinery was completed and, in the Sines refinery, it reached its final stage, as important steps towards resource rationalisation were taken. Start-up of the project is scheduled for mid-2012, when operations are expected to start at Sines. Thereafter, Galp Energia will have a modern and integrated refining base.
Galp Energia’s strategy for Africa has two main lines of action: firstly, to strengthen its position by identifying opportunities for organic growth and by participating in the development of local economies; and secondly, to expand into other countries and markets, namely through the export of oil products, where Galp Energia has competitive advantages in procurement, logistics or operations management.
Galp Energia’s presence in the African market builds on the excellent relations it maintains on the basis of old cultural ties with a number of countries. This presence also fosters investments in other business areas, particularly in Exploration & Production and in biofuels.
Refinery upgrade
In order to optimise and maximise utilisation of its refining system, Galp Energia started in 2008 the conversion of its two refineries using the most recent technology.
The growing demand for diesel in Europe and, particularly in the Iberian market, prompted Galp Energia to reconfigure its refining system and adapt it to the new demand trend. Responding to this trend, the purpose of the upgrade project is to raise the production of diesel by reducing the production of fuel oil, which has a lower value on the market. With the upgrade project, Galp Energia will also take advantage of the difference between the prices of light and heavy crude as it will be able to process the latter in larger quantities when the project has been completed.
The project is expected to start operations in mid-2012, whereupon Galp Energia’s refining system will be completely integrated and adapted to the needs of the Iberian market, namely diesel demand. The expected incremental refining margin arising from this project will lead to a higher cash flow from this activity in 2012.
Matosinhos refinery
The atmospheric distillation unit at the Matosinhos refinery began in June 2011 to process heavy crude under the new operating conditions and the first samples of vacuum gas oil (VGO) were collected from the new vacuum distillation and visbreaker units. The start of operations of these units will be decisive in changing Galp Energia’s production profile, with more diesel and less fuel oil.
Sines refinery
At the Sines refinery, work on the upgrade project intensified with the construction of a steam reforming unit for the production of hydrogen and a unit for recovering sulphur from produced gases, both required for operation of the hydrocracker. At the end of 2011 all new units had been installed and the interconnections completed. The test phase will extend throughout the first quarter of 2012 and the start of operations is expected by mid-year, when Galp Energia will have a completely integrated, reliable, robust and complex refining base.