Government “aggravates” GALP’s natural gas tax liability by €25 million

On face value, news that the government is increasing GALP’s tax liability on profits made on the resale of natural gas, would sound promising. At the very least it suggests Portugal could be making some money from an oil company that stands to make millions drilling for hydrocarbons off the coast of Aljezur and paying a derisory amount for the privilege of doing so.

But the truth of the story may be somewhat different.

GALP has been steadfastly refusing to pay the so-called “extraordinary contribution on the energy sector”, classes both I and II, since 2014, putting the issue in court.

Thus any increase in what it is not paying would appear to be academic.

REN too, the national power grid now controlled by Chinese, has refused to pay what are dubbed CESE contributions (Contribuição Extraordinário sobre o Setor Energético) and EDP is following suit, reports Correio da Manhã.

According to an ‘exclusive ’ carried by the paper today, the government has increased GALP’s CESE this year to €77 million.

GALP meantime has “refused to comment” on the matter, says the paper – explaining that the profits the company is being taxed on stem from the sale of left-over gas purchased to supply Portugal’s national market, but which due to a purported “reduction in domestic demand”, ends up being sold on “international markets”.

The gas in question comes from Nigeria and Algeria, says CM.

GALP’s profits, on contracts covering 2010 to 2026, have been calculated by regulating body ERSE at just a little over €1.15 billion.

What this news item could be masking is a way of ‘twisting GALP’s arm’. The government holds what the Portuguese would call the “cheese and the knife” at the moment. For GALP to go ahead and drill off Aljezur’s coast, it needs the government’s say-so. Without reconciliation of the millions due in CESE payments, this might not be such a foregone conclusion.

For now, secretary of state for energy Jorge Seguro Sanches has simply told CM that he will be using “all means in (his) power” to ensure GALP does stump up for overdue CESE payments.

“The government’s perspective on this is that these contracts involve a shared risk with consumers, and that consumers should share in the gains”, he told the paper.

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