Galp-Northvolt lithium refinery project in Portugal faces delay

LISBON (Reuters) - A plan to build one of Europe's largest battery-grade lithium refineries in Portugal by end-2025 is facing delays due to the complexity of the project and uncertainty about grant funding, one of the partners, Galp, said on Thursday.

The 50-50 joint venture Aurora between the Portuguese oil company and Swedish battery maker Northvolt, set up in November 2021, had previously expected the refinery to start commercial operations in early 2026.

The refinery, with estimated investments of over 1 billion euros ($1.10 billion), aims to have an initial annual production capacity of up to 35,000 metric tons of lithium hydroxide, a key material for lithium-ion batteries.

Galp said in a statement sent to Reuters on Thursday in response to a Reuters query, that it "remains committed to the Aurora joint venture with Northvolt", but "due to the nature and complexity of the project, actions are still underway to ensure it can compete on a level playing field".

It said the consortium still has to secure access to national or European grant funds "that are not yet guaranteed", as well as carry out the necessary studies for the final investment decision.

"That has led to delays in the execution of the project", Galp said, without specifying any new time frame.

It also said it was crucial for the consortium to be confident about the start date for the production of spodumene concentrate from the mines in Portugal.

Northvolt did not respond to a request for comment.

A source familiar with the matter said that although the consortium is expected to receive financing of up to 825 million euros from the European Investment Bank (EIB), that would be a loan rather than EU grants required for the project to be competitive versus rivals in Europe, the United States or China.

The plant would deliver enough lithium hydroxide for 50 gigawatt-hours of battery production per year, with Northvolt using up to 50% of the plant's capacity for its battery making.

German auto maker Volkswagen is the largest shareholder of Northvolt.

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(Reporting by Sergio Goncalves and Marie Mannes; editing by Andrei Khalip and David Evans)