CAPITAL: Lisbon

MONETARY UNIT: Escudo

REFINING CAPACITY: 304,300 b/cd

OIL PRODUCTION: 0

OIL RESERVES: 0

GAS RESERVES: 0

Portugal`s government combined its gas and oil investments into a single holding company to attract foreign investment for its energy industry.

The company, Galp-Gas e Petroleos de Portugal SGPS, included the state`s 55% stake in Petroleos de Portugal (Petrogal) SA, its 5% stake in natural gas distributor Transgas, and its 100%-owned Gas de Portugal.

The government said Petrogal, Transgas, and Gas de Portugal would be more productive under a single holding company.

The government planned to sell shares in Galp to an industry partner and then to the public on the stock exchange during 2000.

Between the distribution of shares to existing minority investors and the sales of stakes to an industry partner and the public, the government expected to reduce its stake in Galp to less than 50%.

Late in 1999 Portugal picked ENI SPA, Italy`s largest oil and gas company, and Iberdrola SA, Spain`s second-biggest power company, to buy 15% of Galp. ENI would get a larger share than Iberdrola.

In other action, Portugal`s Transgas signed a 20-year contract to buy 1 billion cu m/year of liquefied natural gas from Nigerian Liquefied Natural Gas, which operates Nigeria`s LNG export project. Deliveries from the third LNG train were due to begin in late 2002.

The contract followed an agreement between NLNG and Transgas in 1993 for deliveries from NLNG`s first two trains, which began in 1999.

Galp, meanwhile, said it would invest $2.8 billion to extend its gas network to 20% of the population by 2010.

Galp Chairman Henrique Bandeira Vieira said Portugal`s gas network covered only 4% of the population, compared with a European Union average of 22%.

Downstream

Petrogal planned to invest $800 million at its Sines refinery in 2000-03 to meet tighter European Union fuel specifications and to improve the existing refining process.

Goal was to remove sulfur from diesel fuel. EU rules in 2000 were due to fix the maximum diesel sulfur content at 330 ppm, and that limit was due to drop to 50 ppm in 2005.

Sines, south of Lisbon, is the largest of Portugal`s two refineries, with capacity of 213,000 b/d. Petrogal also had a 91,300 b/d refinery near Oporto.

Projects included increasing the capacity of an existing 34,000 b/d gas oil hydrodesulfurization unit to 37,000 b/d; upgrading a 31,500 b/d distillate hydrotreater to 35,000 b/d of deep desulfurization capacity; a new 26,000 b/d fluid catalytic cracking unit; a new 17,000 b/d hydrodesulfurization unit; a new 30,000 b/d hydrocracker; and a hydrogen plant and ancillary units.

In a sign of possible market liberalization, Finance Minister Antonio Sousa Franco said Portugal`s policy of fixed gasoline prices is "irrational" and should be dropped. Under the policy in effect at the time, the government`s gasoline tax varied to keep the price at the pump steady.

Franco said the government should allow gasoline prices to follow the price of crude oil in the international market.