The facility will produce up to 35,000 tonnes of lithium hydroxide per year, the quantity needed to make batteries for 700,000 electric vehicles, the two companies said in a statement.
"Galp and Northvolt have agreed to set up a joint company, Aurora, that aims to become a stepping stone for the development of an integrated lithium-battery value-chain," the statement said.
Portugal has some of the largest reserves of lithium in Europe and the eighth-biggest in the world, said Galp chief, Andy Brown.
Lithium hydroxide is a key material for the lithium-ion battery manufacturing industry, which is expected to grow more than 10-fold by the end of the decade.
A separate project to mine lithium in Portugal still needs the go-ahead from environmental authorities and has raised the hackles of locals and green campaigners.
Following a number of delays, the international tender for mining and extraction rights will not be launched until after a snap general election on January 30, said environment minister Joao Pedro Matos Fernandes.
Elsewhere in Europe, Canadian group Rock Tech Lithium has already announced plans to invest 470 million euros in the construction of a lithium plant in Germany from 2024.
Formerly a state-owned oil company, Galp Energia has diversified into the electrical sector and into decarbonated hydrogen.
Northvolt, whose shareholders include auto giants Volkswagen and BMW, has also teamed up with Volvo in electric mobility projects.
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