By Sergio Goncalves and Pietro Lombardi

LISBON, Oct 26 (Reuters) - Portugal's Galp Energia and Spain's Moeve called off a merger of their downstream assets on Monday as the US-Iran war turns refineries around the world from struggling businesses into prized assets, making long-term valuations for mergers extremely difficult.

Galp and Moeve – formerly known as Cepsa and owned by Abu Dhabi's Mubadala and US investment firm Carlyle – announced a non-binding agreement in January to explore merging some of their assets through two joint ventures.

One source familiar with the talks said volatility on energy markets sparked by the Iran war made it difficult to put a value on the refineries, adding that there is no intention of resuming talks in the mid-term.

Galp co-CEO Joao Diogo Marques da Silva said on a call with analysts that the decision to abandon talks with Moeve came at the "last mile" but it was "nonetheless a well-supported one as the commercial terms didn't allow us to reach a sustainable and value-creative deal".

"No deal is better than a bad deal ... we are really comfortable with the quality of the assets that we hold", he said, highlighting the strong results delivered by the company.

EARNINGS BOOSTED BY RECORD REFINING MARGINS

He said it remained part of Galp's strategy "to segregate the commercial retail business from the industrial business", but that there was "no pressure whatsoever to have a transaction" with a partner.

Moeve CEO Maarten Wetselaar said in a statement the company remained "fully focused" on its strategic transformation towards low-carbon businesses.

Galp also reported a 67% rise in third-quarter adjusted core profit to €1.52 billion ($1.7 billion), beating expectations on the back of record refining margins.

The Portuguese group joined a string of global peers reporting bumper earnings as fuel supply disruptions due to war in Iran pushed diesel, gasoline and other refined-product prices higher relative to crude, boosting refining margins worldwide.

GALP SHARES DROP

Its unit that includes the Sines refinery was the second-largest contributor, with core profit more than doubling to €639 million in the quarter as refining margins more than tripled year-on-year to $33.8 per barrel from $9.5 a year earlier, and doubled from $16.8 in the preceding quarter.

Moeve has yet to report its third-quarter earnings, but in the second quarter its energy business, which includes its refineries, nearly doubled adjusted core profit to €541 million, while refining margins rose to $11.3 per barrel, almost twice the level recorded a year earlier.

The collapse of the talks leaves Galp's refining, chemicals and fuel-retail businesses under its sole ownership, while the group continues to focus on its core growth areas, including oil production in Brazil and renewable energy.

A separate industrial venture would have combined Galp's Sines refinery with Moeve's Huelva and Algeciras refineries, creating a refining platform with crude processing capacity of about 700,000 barrels per day.

The companies had also planned to create a retail business operating around 3,500 service stations, primarily in Spain and Portugal.

Galp shares fell 9.5% in afternoon trading. RBC analysts said investors had expected a Moeve-Galp deal early in the fourth quarter, believing it would eliminate a major obstacle to a potential takeover of Galp in future. They said the lack of a deal "may call into question Galp's premium valuation relative to peers".

($1 = 0.8925 euros)

(Reporting by Sergio Goncalves and Pietro Lombardi; Editing by David Holmes and Jan Harvey)

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