We were founded on 22 April 1999 as GALP – Petróleos e Gás de Portugal SGPS, S.A., as a result of the restructuring of the energy sector in Portugal, to operate in the oil and natural gas businesses.  Two pre-existing Portuguese government-owned companies were placed under our control at that time: Petróleos de Portugal - Petrogal, S.A. (“Petrogal”), the only refiner and the leading distributor of oil products in Portugal, and GDP - Gás de Portugal, SGPS, S.A. (“GDP SGPS”), the company responsible for the import, transportation and distribution of natural gas in Portugal.  Today we are Portugal’s leading integrated oil and natural gas Group, with a growing presence in Spain and a developing power business.

In 2005, the Portuguese government established the national strategy for the energy sector mandating the unbundling (legal separation) of our regasification, natural gas transportation and part of our natural gas storage assets, related liabilities and corresponding activities (the “Regulated Activities”) and the sale of these Regulated Activities to Rede Eléctrica Nacional, S.A. (“REN”), the Portuguese electricity transmission grid operator and one of our former shareholders (the “Unbundling”).  Such sale occurred on 26 September 2006. We continue to be entitled to carry out natural gas sourcing and supply activities in Portugal to large industrial clients, power companies, local distribution companies and autonomous reception, storage and regasification gas units (“AGUs”). We also continue to perform natural gas distribution activities through our equity participations in local distribution companies and AGUs.

The Group activities comprise the following four business areas:

• Our Exploration and Production (“E&P”) business segment holds our upstream assets and is responsible for supervising and carrying out all activities related to the exploration, development and production of hydrocarbons.  Our upstream portfolio consists of interests in 6 blocks in Angola and 54 blocks in Brazil.  Our net entitlement share of production in 2005 was 1.6 million barrels of oil.  As of 30 June 2006, our net entitlement share of proved reserves corresponding to these blocks totalled 35.6 million barrels of oil as per Gaffney, Cline & Associates’ independent report .

• Our Refining and Marketing business segment manages the only two refineries in Portugal, which together processed a total of 14.3 million tonnes of raw materials in 2005, and includes all of our retail and wholesale marketing of refined petroleum products (including LPG activities).  Our Refining and Marketing business segment also controls most of the Portuguese oil storage and transportation facilities, which are strategically located for both export and delivery of our products to the main consumer centres.  Sales of finished products in 2005 amounted to 15.2 million tonnes, including sales to our retail and wholesale customers, as well as sales to competitors and exports.  As of 31 December 2005, we had a retail network of 1,060 service stations (837 in Portugal and 223 in Spain) and in 2005, we had a Portuguese market share of 37% based on retail sales volume and 51% based on wholesale sales volume.  In 2005, we had a leading 44% LPG market share in Portugal based on sales volume and a growing presence in Spain. 

• Our Natural Gas business area consists of our Natural Gas Supply business segment and our Natural Gas Distribution business segment:
  • Our Natural Gas Supply business segment continues, after the Unbundling, to supply natural gas to large industrial customers with annual consumption of 2 million m³ or more, power companies, local distribution companies and AGUs.  These customers together accounted for 4.2 billion m³ in natural gas sales in 2005, of which 4.1 billion m3 constituted the entire gas consumption in Portugal.  We also continue to hold the existing long-term sourcing contracts with companies in Algeria and Nigeria in order to meet future demand from our customers.  Our Natural Gas Supply business also owns underground natural gas storage capacity.
  • Our Natural Gas Distribution business segment, together with certain unconsolidated local distribution companies in which we hold a significant interest, supplied 478 million m³ of natural gas in 2005 to approximately 738,900 residential, commercial and industrial customers with annual consumption below 2 million m³. Our natural gas distribution infrastructure, including certain unconsolidated local distribution companies in which we have a significant interest, covers a total of 8,761 km of secondary networks.

• Our Power business segment generates electric and thermal energy to supply large industrial customers.  This segment’s total energy production in 2005 was 1,375 GWh.  We currently own equity participations in three cogeneration plants with a total installed capacity of 80 MW.  In addition, we have plans to build two 400MW Combined Cycle Gas Turbine (“CCGT”) plants (subject to obtaining all the necessary licences), and in 2005 we became part of a consortium to bid for wind energy installations in Portugal in the public tender organised by the Portuguese government.