Portuguese oil company Galp Energia has unveiled a fresh strategy to reshape its portfolio by scaling up its renewable energy business and accelerating the path to become net carbon neutral by 2050.
In a capital markets day presentation on Wednesday, Galp said it intends to continue focusing on exploration and production assets in Brazil, Angola and Mozambique, whilst progressively transforming its activities in alignment with the energy transition.
“We will continue to deliver growth from our upstream assets and accelerate the transformation of our industrial and commercial activities, both underpinning a balanced capital allocation framework to enhance our portfolio and deliver a competitive shareholder return,” said chief executive Andy Brown.
As part of the revamped strategy, Galp aims to have a more electrified, diversified and decarbonised global portfolio by 2030, which includes plans to slash absolute emissions from operations by 40%.
On the upstream front, Galp will focus on free cash flow maximisation, targeting only the development of existing projects.
Galp expects to end the year with output of between 125,000 and 135,000 barrels of oil equivalent per day, before increasing about 25% by 2025, with the Bacalhau pre-salt development in Brazil set to receive the bulk of upstream investments.
Galp holds a 20% working interest in the Equinor-operated Bacalhau field, which is set to enter production in 2024.
'Investment case now somewhat more muddled'
“The materials released this morning confirmed our fears that having been a clear play on Brazilian production growth, the investment case is now becoming somewhat more muddled,” wrote Redburn analyst Stuart Joyner.
The change of emphasis to greener initiatives is reflected on planned investments, which is now expected to average between €800 million and €1 billion ($977 million and $1.22 billion) per year until 2025 — down 20% from the previous estimate — with about half going to low-carbon and renewables projects.
According to Redburn, the company’s new outlook of achieving production rates of 163,000 boepd in 2025 is lower than the 200,000 boepd guidance issued last year before the Covid-19 pandemic.
Instead, Galp is now targeting to increase its renewables operating capacity to 4 gigawatts by 2025 and to 12GW by 2030, while also investing to develop green hydrogen solutions.
“We are also assessing entry opportunities in the fast-growing battery value chain, capturing an early mover advantage in Europe,” the company said.
Brown added that by the end of the decade Galp will have a more decarbonised energy portfolio capable of delivering long-term growth with sustainable value.