Natural gas overview
Natural gas was introduced into Portugal in 1997 and has since become a key energy source, accounting for approximately of quarter of total energy supply. Portugal’s natural gas supply and demand notably increased in the past two decades, while the share of gas in electricity generation has been volatile.
Portugal has no natural gas production and imports 100% of its gas supply. The government sees a role for natural gas in its energy transition, namely as back-up for electricity generation and is pushing for more efficient gas markets and increased gas import and export capacity.
Portugal’s gas supply is imported through a liquefied natural gas (LNG) import terminal located in the port of Sines and two cross-border gas pipeline interconnections, Campo Maior and Valença do Minho. The largest gas consuming sector is heat and power generation, followed by industry, with minor shares for residential, services/other and transport.
It is mandatory for all natural gas suppliers in Portugal to maintain reserves. Mobilisation of these security reserves can only be decided by the government, and is the most important non-market based gas emergency response measure. Also, as a last resort measure, a solidarity mechanism mandated by EU Regulation can be applied for supplying gas to protected customers.
Portugal has a mixed policy on natural gas. The government sees a role for natural gas in its energy transition and is pushing for more efficient gas markets and increased gas import and export capacity. However, there are also clear goals to significantly reduce natural gas demand through increased electrification, energy efficiency and deployment of renewable energy including biomethane and hydrogen produced from renewable energy.
Natural gas infrastructure
Portugal is supplied with natural gas through two pipeline interconnection points and a LNG terminal. Portugal has two large-scale natural gas storage facilities. The main axis of the gas network runs along Portugal’s coast to supply the major population centres, power plants and industrial sites.
Networks: transmission and distribution
Portugal’s natural gas transmission network is operated by the national gas transmission system operator, REN Gasodutos, had 1 375 km of high-pressure gas pipelines. The transmission network serves primarily to deliver natural gas to the gas distribution network and several large-scale gas consumers, including gas-fired power plants and large industrial consumers.
The gas transmission network has two main axes; the North-South axis runs from the Sines LNG Terminal to the Valença do Minho interconnection and supplies natural gas to the most densely populated part of the country. The East-West axis primarily delivers gas imported via Campo Maior into the North-South axis.
Portugal’s distribution network is composed of 19 100 km of medium and low-pressure pipelines which supply gas to consumers in the residential, commercial and small and medium-sized industrial sectors. The gas distribution network is operated by 11 privately-owned distribution system operators under concession or license agreements. Galp Gás Natural Distribuição (GGND) owns or holds controlling shares in 9 of Portugal’s 11 DSO, which in 2019 accounted for the majority of gas demand and consumers. The DSOs are responsible for the gas supply in exclusive geographical areas on the basis of a concession from the Minister of Environment and Climate Action or a license granted by DGEG (Directorate General for Energy and Geology).
LNG terminal and interconnections
The Sines LNG terminal is the only LNG terminal in Portugal. LNG in imports increased significantly in the past two decades. Reception, storage and regasification of LNG are carried out under 40-year concession contract held by REN Atlântico. The Sines terminal has an unloading capacity of 10 000 m3 per hour and can receive large ships with LNG capacities of 40 000 to 216 000 m3.
There are several satellite autonomous regasification units in Portugal. These units are supplied via tanker trucks that load LNG at the Sines terminal, with a tanker loading capacity of 36 tankers/day at 195 m3/hour rate. For gas distribution there are 49 satellite LNG regasification plants in operation and 37 potential plants under construction. In addition, there are also 55 satellite plants for private consumption.
Since 2014, Gaslink (a consortium of Grupo Sousa and Galp) has operated a virtual pipeline consisting of truck deliveries of LNG from Sines to the port of Lisbon, where LNG containers are loaded onto ships and delivered to the port of Caniçal in Madeira and there with truck to Madeira’s satellite LNG regasification plant. The gas supplied via this virtual pipeline supports operation of Madeira’s only natural gas power plant.
Portugal’s two high pressure pipeline interconnections have a combined entry and exit capacity of 144 GWh/d imports and 80 GWh/d exports. Since 2015, overall pipeline utilisation is down as an increased share of imports have come through the LNG terminal. Campo Maior is the primary interconnection and is mostly used to import gas produced in Algeria, via Morocco and Spain. The Valença do Minho interconnection has a smaller capacity and links Portugal to the north-west of Spain (Galicia).
Gas storage facilities
Portugal has two large-scale natural gas storage facilities, the Carriço UGS facility and LNG storage at the Sines terminal, which together provide a maximum technical storage capacity of around 600 mcm, of which 242 mcm for LNG storage capacity and 360 mcm of underground storage capacity.
The Carriço UGS is composed of six salt caverns with a combined storage capacity of 360 mcm, a withdrawal capacity of 8.2 mcm/d and an injection capacity of 2.3 mcm/d. The facility is connected to the high pressure gas transmission network near the middle of the main North-South axis that serves the most densely populated section of the country. The strategic reserves are used to balance seasonal and daily fluctuations in demand and supply. The LNG storage at the Sines terminal consist of three LNG storage tanks with a combined LNG storage capacity of 390 000 m3, corresponding to around 242 mcm. REN Atlântico holds the concession for operation of the Sines LNG terminal including the LNG storage.
Regarding compliance with the N-1 standard (i.e. when losing the capacity of the Sines LNG terminal, the most significant infrastructure in terms of system entry capacity), the forecasted supply/demand capacity balance shows that the N-1 factor ranges between 78 % and 93% depending on the stock levels of the Carriço gas storage facility.
Future compliance with the N-1 standard is subject to energy transition policies promoted by the government. The government is preparing measures to support domestic production of renewable gases, such as low-carbon hydrogen, including options to use the natural gas infrastructure for grid injection of renewable gases. The Hydrogen Strategy, approved in August 2020, notes that by 2050 most demand for gas will be covered by renewable gases and Portuguese gas security can be strengthened by this future transformation of the gas supply mix.
Natural gas infrastructure in Portugal, 2022
Gas emergency response policy
As is the case of oil, Portugal’s gas emergency response policy is based on the Decree Law 114/2001 on Energy Crises (DEC), which specifies that emergency response to an energy crisis requires plans and measures to optimise the use of available energy resources, based on decision-making by the government. The DEC also mentions that all public and private entities have the duty to collaborate at the time of emergency and disobedience is penalised. The Decree Law 62/2020 on the National Gas System, mentions and considers the Preventive Action Plan and Emergency Plan, in line with the EU Regulation 2017/1938 which defines measures to face crisis/emergency situations.
The Minister of Environment and Climate Action can define priority rules in case of an emergency, taking into consideration the need to provide a stable gas supply in particular for household consumers, health and safety services and other consumers that are highly dependent on gas.
On an annual basis, DGEG issues, in collaboration with the TSO, the Security of Supply Monitoring Report (RMSA) of the National Gas System in accordance with the Decree Law 231/2012. The RMSA is the national tool for assessing medium-long term natural gas needs in accordance with energy policy guidelines of the European Commission. It covers outlooks for supply and demand of the national market, the quality and level of network maintenance, and the measures to deal with extreme levels of demand.
The main regional risks affecting imports from Algeria and Norway are identified in the Common Risk Assessments carried out with other Member States within regional risk groups. The Preventive Action Plan (focusing on preventive measures to be taken in the short and medium term) and the Emergency Plan (focusing on measures in cases of gas contingency) take into consideration the conclusions of the national Risk Assessment, which is in line with the most recent results from the RMSA, as well as specific chapters dedicated to regional cooperation. Notably, the Emergency Plan defines the roles and responsibilities of all stakeholders, including the government authorities and the TSO, and identifies measures and actions to be taken to mitigate the impact of a short-term disruption of gas supply. The measures, actions and procedures contained in the Emergency Plan are tested at least once every four years.
In Portugal, security of supply issues are supervised by the government through DGEG, which assumes core roles and responsibilities of the Portuguese gas National Emergency Strategy Organisation (NESO). The natural gas crisis cell, mainly consisting of DGEG and the Global Technical Manager of the gas system (role performed by the TSO, REN Gasodutos), carries out the management and coordination of any gas crisis situation and is responsible for setting the emergency measures to be implemented by the relevant entities in the system. There are interactions between this cell and the Energy Services Regulatory Authority (ERSE) which is responsible for regulating the gas sector; ERSE receives information regarding the level of gas crisis and the activation of emergency response plan. The institutional framework, including roles and responsibilities of gas NESO and coordination, are described in detail in the Emergency Plan.
When a gas crisis occurs and its severity is ascertained, the crisis cell convenes in a matter of hours and the emergency response plan is launched, including the mobilisation of stand-by operation teams required to perform any non-market based emergency response measure that may eventually be activated.
Mobilisation of security gas reserves is the most important non-market based emergency response measures. Release of compulsory gas stocks is decided by the Minister of Environment and Climate Action under conditions established by legislation and no automatic triggers are established for that purpose. The diversification of supply sources, including pipeline interconnections with Spain and the LNG terminal, allows for a good security level in the Portuguese gas system.
As a last resort measure, a solidarity mechanism can be applied for supplying gas to protected customers. EU Regulation 2017/1938 requires EU Member States to conclude solidarity agreements with EU Member States with whom their gas system is directly connected. These agreements should define the necessary technical, legal, and financial arrangements that shall apply when solidarity is requested. Portugal and Spain are discussing how to operate this mechanism.
In a gas crisis requiring reduction of gas consumption, short-term fuel-switching capacity is available, but limited to two CCGT plants (990 MW and 830 MW) equipped with dual fuel-fire capabilities using natural gas and petroleum distillates. These dual-fuel power plants, however, are not obligated to hold any diesel stocks as no legal requirement exists for maintaining fuel-switching capability.
Gas electricity interlinkage and coordination
While the Portuguese government is aiming to reduce natural gas demand, the government sees a role for natural gas in the energy transition, especially to provide security of supply for electricity generation and to cover demand from industry and other hard-to-decarbonise sectors. Notably, gas-fired electricity generation has a preferential tax treatment versus coal, which contributed to plant operators deciding to end coal-fired electricity generation in 2021. The phase-out of coal-fired generation and the expected increase in shares of generation from variable solar PV and wind could give natural gas power plants an increasing role in balancing Portugal’s electricity demand and supply.
Obligation for emergency gas storages
All suppliers of natural gas in Portugal are obliged to maintain gas reserves, corresponding to 30 days of exceptionally high demand of protected customers. Suppliers are also obliged to maintain gas reserves corresponding to 30 days of exceptionally high gas demand of non-dual-fired combined cycle gas turbines (CCGTs). The TSO, REN Gasodutos, regularly monitors the reserves, and suppliers who fall short of their required stock levels may be penalised. The reserves are commingled with commercial stocks. On top of the mandatory stocks, the volume of commercial stocks stored in the underground storage and the LNG terminal depends on commercial decisions of market stakeholders.