Galp and Moeve (formerly Cepsa) have agreed to merge their downstream businesses, creating two new entities: IndustrialCo for refining assets and RetailCo for service stations. The merged refining system will have a capacity of 710,000 b/d, making it a major player in Southern Europe. Moeve’s shareholders will control 80% of IndustrialCo, with Galp holding a 20% stake. The retail network will include approximately 3,500 service stations in Spain and Portugal, enhancing scale and integration in a competitive market.

The merger excludes the upstream assets of both companies. Galp’s upstream oil and gas business in Brazil and Namibia is not part of the deal, while Moeve has divested most of its upstream assets in recent years. The merged system will bring together three core refineries in Spain and Portugal, oriented toward medium and light crude slates sourced from various regions.

Demand for gasoline in Spain and Portugal has been stable, with significant growth in Spanish consumption. Diesel demand has remained steady, reflecting the dominance of diesel engines in the fleet. The rise of hybrid vehicles has supported gasoline consumption, contributing to the resilience of fuel demand in the region.

The decline in clean-product exports from Spain can be attributed to stronger domestic demand and increased competition in export markets. New capacity in the Middle East and India, along with the commissioning of Nigeria’s Dangote refinery, has impacted Mediterranean trade routes. Clean product exports have become more competitive and margin-sensitive.

The merger between Galp and Moeve aims to strengthen their retail integration and navigate the transition to a more carbon-constrained market. Both companies are investing in biofuels projects to adapt to stricter climate policies in Europe. The merger provides a pathway through Europe’s energy transition, offering a more stable earnings profile in a cyclical refining market.

The merger creates a downstream platform with greater scale, retail integration, and a clearer pathway through Europe’s energy transition. It allows Galp to focus on higher-return upstream growth in Brazil and Namibia while retaining downstream cash flows. The move challenges Repsol, the regional refining and retail leader, and sets the stage for further mergers in the European downstream landscape.

Read more at Yahoo Finance: Galp and Moeve Merger to Reshape Iberian Downstream