UPDATE 1-Portugal says to sell up to 7 percent of Galp

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LISBON, July 31 (Reuters) - Portugal will sell up to 7 percent of oil company Galp Energia (GALP.LS) to private investors as part of a new stage of the company's privatisation, the Portuguese government said in a statement on Thursday.

The sale of the Portuguese state's remaining stake in Galp will be made through the issuance of bonds convertible into shares. Galp has a market capitalisation of 8.64 billion euros.

"This decree will approve the fifth stage of the privatisation of Galp Energia's capital," the government said after its weekly cabinet meeting.

The operation will be open to local and foreign institutional investors, it added.

Galp operates two oil refineries in Portugal and is searching for oil in Angola, Brazil, East Timor, Mozambique and Venezuela. It recently made a significant oil find with partner Petrobras (PETR4.SA) at Brazil's Tupi field. (Reporting by Ruben Bicho, Writing by Henrique Almeida, editing by Will Waterman)