Galp and Moeve discuss tie-up that could create European refining giant

The other would operate Moeve's Huelva and Algeciras oil refineries and Galp's Sines refinery. The three facilities have combined capacity of around 700,000 barrels per day.

Moeve would be the majority owner in the unit, with Galp set to own a minority stake above 20 per cent. Galp's upstream oil and gas production business would not be included in any merger.

This business includes stakes in much-watched, undeveloped oil fields offshore Namibia. "We expect the key takeaway from the market is that this may increase the likelihood of Galp as a take-out candidate given the cleaner portfolio," said RBC analyst Biraj Borkhataria.

Galp's share price was up 1.4 per cent at 09:21 GMT, outperforming a broader index of European energy firms, which was down 1.4 per cent.

(Additional reporting by Stephanie Kelly; Editing by Joe Bavier)