Sines refinery: Portugal’s energy sovereignty at risk

Portugal’s fuel-refining landscape could change over the coming months. The transaction now being negotiated by Galp and Spain’s Moeve would create a major Iberian fuel-refining and distribution group, in which the Portuguese company would hold a minority stake of about 20%.

The deal includes the Sines refinery, which would be transferred to the new entity. Effective control of the country’s sole refining facility would no longer be 100% Portuguese, as it has been until now. In return, Galp - in which the State holds an 8% stake through Parpública - would gain greater scale in Spain, commercial integration and access to two refineries across the border.

The Galp and Moeve refining deal

From a corporate perspective, the logic is understandable. The sector is facing immense pressure: the energy transition, squeezed margins, refinery closures across Europe, and the need for substantial decarbonisation investment. On a continent where scale has again become a prerequisite for survival, the prospect of creating a “European champion” in the sector is appealing - even if Repsol’s leadership does not appear to be under threat.

Yet the timing could hardly be worse. The world has changed - or is changing… - at a breathtaking pace. Europe is preparing for a scenario it believed had been left behind: the possibility of war within its own geographical area, beyond Ukraine’s borders.

Member states are debating defence spending of around 5% of GDP. Terms such as strategic autonomy, industrial resilience and security of energy supply are being heard once more. All of this has returned to being a matter of state policy - though, in truth, it never ceased to be.

Sines refinery and Portugal’s energy sovereignty

This raises strategic questions that I hope we will never need to answer. In a situation of serious disruption - conflict, prolonged shortages, a state of emergency and so on - whose interests would guide that infrastructure: Portugal’s or Spain’s?

Manuel Castro Almeida, the Economy Minister, also acknowledges how important it is for control of the Sines refinery to remain in Portuguese hands. “It would be better for us to have a refinery fully controlled from Lisbon. It is the only Portuguese refinery with significant weight in our economy and in the country’s sovereignty,” he said last week at the “Conversa Capital” conference organised by “Jornal de Negócios/Antena 1”.

The handling and monitoring of this matter is being led by the Minister for Environment and Energy, Maria da Graça Carvalho, whose credentials in these fields are highly relevant. The minister says she is “aware of the advantages and the possible disadvantages” of the deal.

Asked whether national energy sovereignty is at risk, she rejects that prospect. “I am a strong advocate of an open market. We have much to gain from an open market. Those who close themselves off do so because they are afraid.” I would not be so categorical. The minister’s confidence and experience should reassure us, but they should not make us complacent.

Strategic control in extreme circumstances

In extreme scenarios, history has repeatedly shown that states almost always give priority to their own interests. We are discussing fuel, but the same could be said of water. We all remember the recurring tensions and disputes between Portugal and Spain over the management of dams on shared rivers - the Douro, Tagus and Guadiana - with Portugal accusing Spain of holding back water for hydroelectric purposes while disregarding the minimum flows agreed under the Albufeira Convention.

Whatever the outcome, it is therefore important to remember that the Sines refinery is not merely an industrial asset. It is also an instrument of sovereignty. That dimension becomes increasingly important as we try to foresee the problems troubling Europe’s future. There are many of them, and energy security is one.