The Algarve Property Specialists

Galp drops Alentejo oil prospection plan

Portugal's oil and gas giant Galp has abandoned plans to drill oil test wells off the Alentejo coast over a legal injunction from a local Algarve court.
The decision to end oil prospection with the Italian energy company Eni comes on the day that it announced €598 million in profits for the first three quarters of 2018.

Friday, 16 November 2018 - Press

The profits represent an increase of 54% in relation to the same period last year. The company benefited from an increase in production and a rise in the sale price of both oil and natural gas.

But the company, alongside its partner the Italian oil company Eni, has decided to abandon plans to exploit oil reserves off the Alentejo coast at Aljezur.

The CEO of Galp Energia, Carlos Gomes da Silva announced that Galp would no longer undertake oil exploration because of legal complications.

In a statement Galp says “Galp and Eni have taken the decision to abandon the exploration project in the Alentejo basin. We regret that it is impossible to evaluate the potential of offshore resources because the existing conditions make it objectively impossible to proceeed with exploration activities”.

The communiqué further reads “Given the existence of various court processes underway on this matter, the two companies will not make any further comments at the present time.”

Galp (30% of the consrtium) and Eni (70%) had until mid-January to carry out the first test well drilling around 46 kilometres from Aljezur. However, a court in Loulé, Algarve, accepted an injunction applied for by the Algarve Free from Petroleum platform (Plataforma Algarve Livre de Petróleo) to suspend drilling, thereby bringing the project to an end.

The results were published by the Portuguese market and securities commission (CMVM). Galp stated that its EBITDA (results before interest, taxes, depreciation and amortisation) stood at €1.7Bn from January to September, up 32% on the same period last year.

The company says that average production increased 16% overall for the first nine months of the year, to a total of €105.3 million barrels of oil per day, a development explained by the “development of Project Lula in Brazil” and by the start of production at Kaombo in Angola.

Despite these improvements, the company increased its debt in relation to the last period under analysis. At the end of September, Galp amassed a net debt of €1.8Bn which represents an increase of €162 million on the amount registered at the end of June 2018.

The increase in debt was down to “dividend payouts and bonuses regarding block bid rounds (a competitive bid round for new licensing) in Brazil.