Core Insights - The merger between Galp and Moeve aims to consolidate their downstream operations, creating a significant player in the Southern European refining and retail market with a combined capacity of approximately 710,000 b/d [4][13] - The merger is strategically designed to enhance retail integration and scale, allowing the combined entity to better navigate the competitive landscape and adapt to evolving market demands [11][12] Refining Capacity and Configuration - The merged system will include three core refineries: San Roque (250,000 b/d), La Rábida (240,000 b/d), and Sines (225,000 b/d), collectively accounting for nearly 30% of Spain's national distillation capacity [2] - The refineries are configured to optimize gasoline and middle-distillate yields, with diesel/gasoil making up about 40% of output, gasoline around 20%, and jet fuel typically 10-15% [1] Demand Trends - Gasoline demand in Spain has shown unexpected growth, peaking at approximately 187,000 b/d in July 2025, with an annual growth rate of 8% for 2025 [5][6] - Diesel demand remains stable, reflecting the dominance of diesel engines in the vehicle fleet, while the anticipated decline in clean-product demand has not yet occurred [7] Vehicle Sales and Market Dynamics - By mid-2025, hybrids accounted for about 40% of new car registrations in Spain, supporting gasoline consumption rather than displacing it [8] - The tourism sector has also contributed to gasoline demand, with record visits to Spain and Portugal in 2025 [8] Export and Competitive Landscape - The increase in domestic gasoline consumption has reduced the volume of clean products available for export, with Moeve's clean-product exports from Spain averaging around 65,000 b/d, approximately 32% below 2021 levels [9] - The export environment has become more competitive due to new capacities in the Middle East and India, impacting Mediterranean trade routes [10] Retail Integration and Strategic Positioning - The merger will create a network of around 3,100 service stations, enhancing captive demand and improving product placement synergies [11] - The long-term rationale for the merger includes adapting to stricter climate policies and transitioning towards renewable fuels, with both companies pursuing biofuels projects [12][13] Strategic Implications - The merger positions Galp and Moeve to focus on higher-return upstream growth while maintaining exposure to downstream cash flows [13] - The transaction represents a strategic challenge to Repsol, the regional leader, which has yet to articulate a comparable downstream strategy [13]