LISBON - Portugal will launch a pioneering auction for rights to sell green hydrogen for injection into the national gas grid in the coming weeks, with crucial state aid being discussed with Brussels, Energy Secretary Ana Fontoura said on Thursday.

Some analysts say the sale - the first of its kind in Europe - could kick-start Europe's fledgling market for green hydrogen, as countries turn to it to tackle carbon emissions and improve energy security.

"The auction for green hydrogen and biomethane (injection into the natural gas grid) will be launched in the coming weeks. We are dealing with state aid issues with the European Commission", Fontoura, energy secretary at the environment ministry, told a conference.

She did not say how much aid the government was intending to provide.

Under the terms of the auction, energy group Galp will contract to buy green hydrogen mixed with natural gas from producers and resell it to meet demand, a system designed to boost investment in production by giving suppliers a guaranteed buyer.

That would remove the need for dozens of bilateral contracts between suppliers and consumers.

Portugal wants to become a major producer and exporter of green hydrogen produced through a process of electrolysis using renewable energy.

Portugal's largest gas distributor Floene tested for many months whether its polyethylene pipelines for gas can also carry hydrogen with gas blended with up to 5% of hydrogen and proved it can do so without any leaks.

Portugal eventually plans to lift that share to 20%.

The government said in July that new electrolyser capacity to produce green hydrogen should reach 5.5 GW by 2030, up from 2.5 GW forecast previously, due to strong investment intentions.

Oil and gas company Galp plans to build a green hydrogen unit and is working on another plant with EDP-Energias de Portugal.

Others interested in such plants include Portuguese-Danish-Dutch consortium Madoqua and a consortium of Portugal's three main glass producers and two biggest cement makers, together accounting for 10% of the country's industrial carbon emissions.