Galp and Moeve Merger to Reshape Iberian Downstream
Galp and Moeve (formerly Cepsa) announced on January 8, 2026 that they have reached a non-binding agreement to merge their downstream businesses, combining their refining and fuel retail operations into two new entities. Under the proposed structure, refining assets will be consolidated into IndustrialCo and service stations into RetailCo. The combined refining system will total roughly 710,000 b/d in capacity, placing it among the largest downstream players in Southern Europe, with Moeve’s shareholders Mubadala and Carlyle controlling 80% of IndustrialCo and Galp retaining a 20% minority stake. The merged retail network (50:50) will span about 3,500 service stations across Spain and Portugal, materially enhancing scale and integration in a highly competitive market.
Neither company is bringing its upstream assets into the merger. Galp’s upstream oil and gas business (centred on offshore deepwater Brazil and Namibia) is excluded from the deal and will remain outside IndustrialCo. Moeve has divested most of its upstream assets following series of sales: in 2023 it sold its UAE equity stakes to TotalEnergies and sold its Colombian and Peruvian upstream assets to PetroTal in 2024. The Spanish company still clings to its Algerian gas assets, mostly due to its strategic proximity and importance to Spain’s energy security.
This way, the merged system will bring together three core refineries with complementary roles. In Spain, San Roque near Gibraltar (around 250,000 b/d) and La Rábida in Huelva (around 240,000 b/d) together account for close to 30% of national distillation capacity. In Portugal, Sines (around 225,000 b/d) remains the country’s sole operating refinery following the closure of the Porto refinery in 2021. Collectively, the system is oriented toward medium and light crude slates sourced primarily from the US, Brazil, Nigeria and North Africa, favouring medium-sweet, low-sulphur blends.
From a configuration standpoint, the system is firmly fuels-oriented. San Roque is a medium-complexity, FCC-based refinery optimised for gasoline and bunkering fuels, reflecting its proximity to the Algeciras bunkering hub and its access to diversified crude imports at relatively low operating cost. La Rábida and Sines are more conversion-intensive, with hydrocracking capacity that reduces fuel-oil exposure and lifts middle-distillate yields, particularly diesel. Across the system, diesel/gasoil account for roughly 40% of output, gasoline around 20%, and jet fuel typically 10–15%. This configuration supports compliance with European fuel standards but leaves the system structurally exposed to transportation fuel demand trends.
Those demand trends, however, have evolved more slowly than widely anticipated. Contrary to expectations of a steady contraction, gasoline demand across the Iberian Peninsula has not been declining. In Spain, gasoline consumption has increased consistently, peaking around 187,000 b/d in July 2025, the highest seasonal level in the past 5 years. Based on data from January-November 2025, this year’s annual rate of growth in Spanish gasoline demand jumped to 8%. Portugal shows a similar pattern, with summer gasoline demand peaking at roughly 37,000 b/d in August 2025, also a five-year high and marking the same 8% total annual growth rate as in Spain.
Diesel demand, while no longer growing, has remained broadly stable in both countries, reflecting the legacy dominance of diesel engines in the passenger and commercial fleet. As a result, the anticipated collapse in clean-product demand has not yet materialised.
The structure of new vehicle sales helps explain this resilience. By mid-2025, hybrids accounted for about 40% of new car registrations in Spain, while petrol-only vehicles represented roughly 30%. Fully electric vehicles remained a comparatively small segment at around 8% of new sales, despite policy support and infrastructure subsidies. In Portugal, hybrids accounted for 60% of new car sales. Because the overwhelming majority of hybrids on the market are petrol-powered, the rapid penetration of hybrids has, in practice, supported gasoline consumption rather than displaced it. Additionally, the region boasts its position as one of the key tourism centres in Europe, witha record 97 million visits to Spain and 33 million visits to Portugal in 2025 (a 3.5-4% rise year-on-year). While long-term policy targets (including the European Union’s now-postponed 2035 fossil-powered car ban) clearly point toward eventual demand decline, the current car fleet of Iberian drivers, as well as tourism growth dynamics, suggest that petrol demand is unlikely to fall sharply in the near to medium term, even as diesel remains flat.
These domestic demand trends have direct implications for refining balances and exports. Rising gasoline consumption and stable diesel demand in the south of the Iberian peninsula have absorbed a larger share of the domestic output of Moeve, apparently reducing the volume of clean products available for export. In that context, the decline in Moeve’s clean-product exports from Spain (averaging around 65,000 b/d, roughly 32% below 2021 levels) most likely reflects stronger domestic absorption.
That decline has coincided with a far more competitive export environment. New capacity in the Middle East and India has increased pressure on Mediterranean trade routes, while the commissioning of Nigeria’s Dangote refinery in 2024 has begun reshaping West African flows by reducing reliance on European supply. Indian refineries, including sanctioned Vadinar, have demonstrated an ability to place clean products into African markets at discounted prices, particularly where buyers are less sensitive to regulatory provenance. In this environment, clean product exports are becoming a contested, margin-sensitive outlet rather than a reliable direction for sales of extra output for Iberian refiners.
Retail integration sits at the core of the merger’s industrial logic. Combined, Galp and Moeve would control around 3,100 service stations across the Iberian Peninsula, compared with roughly 3,700 operated by their immediate competitor, Repsol. While still lagging behind the market leader, the merged network materially strengthens captive demand, improves product placement synergies, and partially insulates refining margins from export volatility. In a market where refining profitability is increasingly cyclical and policy-constrained, downstream marketing offers a more stable earnings profile.
Beyond scale, the longer-term rationale of the merger lies as a survival strategy in an increasingly carbon-constrained market. Across Europe, stricter climate policy targets are becoming a central determinant of downstream strategy, pressing refiners to adapt even if near-term fuel demand remains resilient. Galp is developing an integrated biofuels project at Sines through its joint venture with Mitsui (Japan), targeting around 250,000 t/y of renewable diesel (HVO) and sustainable aviation fuel (SAF) by the mid-2020s, supported by renewable hydrogen supply and designed to reposition the refinery as a hybrid fuel industrial site. Moeve is pursuing a larger-scale transition centred on La Rábida, where a second-generation biofuels plant (currently under construction) is expected to produce around 500,000 t/y of HVO and SAF from waste feedstocks, complemented by plans to deploy up to 2 GW of green hydrogen electrolysis across its refining system over the coming decade.
Taken together, the merger creates a downstream platform with greater scale, deeper retail integration, and a clearer pathway through Europe’s energy transition. For Galp, the structure enables capital flows to be focused on higher-return upstream growth in Brazil and Namibia, while retaining exposure to downstream cash flows. For Moeve, the transaction consolidates control over a more diversified Iberian downstream system and provides access to a stable crude supply through Galp’s overseas portfolio. The move also represents a strategic challenge to Repsol, the regional leader in refining and retail, which announced plans for a $19 billion upstream reverse merger in November 2025 (potentially with US shale specialist APA) but has yet to articulate a comparable downstream strategy. More mergers may follow on the regional market: in the European downstream landscape shaped as much by regulation as by capital, the scale and profitability of energy transition will be the new currency of competitiveness.
By Natalia Katona for Oilprice.com
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