Galp, a Portuguese energy company, has cancelled its plans to construct the Aurora lithium refinery in Portugal, Reuters reported.

The decision came after the company was unable to secure a new partner following the withdrawal of Northvolt, a Swedish electric vehicle (EV) battery manufacturer, from their 50-50 joint venture (JV).

The JV was established in 2021, aimed at developing a lithium processing plant in the Sapec Bay Industrial Park in Setubal, on Portugal's coast, by leveraging the country’s lithium reserves.

The project was expected to produce 35,000 tonnes of battery-grade lithium hydroxide annually, enough to support 50 gigawatt-hours of battery capacity.

It was expected to commence commercial operations in early 2026 and create more than 1,500 jobs in the region.

The investment for the project was estimated to exceed €1bn ($1.05bn).

The refinery was expected to utilise a conversion process that deployed the latest technologies. Green energy was set to power the conversion process to increase its sustainability and efficiency.

However, the refinery faced delays due to the project's complexity and uncertainties surrounding funding.

Additionally, declining lithium prices, attributed to an oversupply from China, further diminished the attractiveness of the project.

In the statement Galp said: “Despite significant efforts, which included assembling a qualified team, conducting engineering studies, preparing licensing processes, and seeking incentives and funding, the current context and the inability to count on an international partner make it impossible to continue with the project.”

Northvolt, which had been Europe's leading contender to become an EV battery champion, recently filed for US Chapter 11 bankruptcy protection.

The development followed unsuccessful funding discussions with investors and creditors including Volkswagen and Goldman Sachs.

Galp also signed an heads of agreement in 2021 with Savannah Resources for strategic investment and alliance in the lithium field around the Mina do Barroso Lithium Project in northern Portugal.

The deal marked Galp's entry into the field of lithium exploration.