The national natural gas system can be divided into six major functions: reception, storage and regasification of LNG, underground storage of natural gas, transmission of natural gas, distribution of natural gas, supply of natural gas and operation of the natural gas market. As with electricity, each of these functions must be operated independently from the others, subject to certain exceptions.
In much the same manner as the national electricity system, an integrated national natural gas system has been established, in which the supply of natural gas and management of the organized markets are open to competition, subject to obtaining the requisite licenses and authorizations. The reception, storage and regasification of LNG, underground storage of natural gas and transmission of natural gas continue to be provided through the award of public service concessions. The distribution of natural gas is provided through the award of public service concessions or licenses.
Portugal is not a producer of natural gas. Natural gas is purchased from other countries pursuant to long-term supply contracts. Natural gas is fed into the national gas transmission network through three entry points: the Campo Maior entry point, which receives natural gas from Spain, the LNG terminal located at Sines, which receives shipments of LNG from methane tankers, and the Valenca do Minho entry point, which occasionally receives natural gas from Spain.
- Reception, storage and regasification of LNG, underground storage of natural gas and transmission of natural gas
In the Sines terminal, LNG is offloaded and pumped into temporary storage tanks, where it remains until a regasification order is issued by the owner of the gas. LNG undergoes regasification prior to delivery into gas pipelines. Regasification occurs at the Sines LNG terminal, in order to convert the LNG delivered at the terminal into gaseous form prior to delivery into the national gas transmission network. The Sines terminal also has the facilities to fill up tankers to transport LNG.
- Underground Storage
Unlike electricity, excess natural gas can be stored in its normal form for future use. Underground storage involves the diversion of excess natural gas into gas caverns, where the gas is stored until it is reintroduced into the national gas transmission network. These caverns enable a speedy mobilization of the gas contained.
- Transmission
Natural gas is transmitted through various high pressure pipelines forming the national gas transmission network connecting to medium and lower pressure pipelines operated by the distribution companies for distribution to end users.
The activities of the reception, storage and regasification of LNG, underground storage of natural gas and transmission of natural gas are made under exclusive concessions granted by the Portuguese State (40 years) and required to allow third party access at published tariffs applicable to all eligible customers, including supply companies. These tariffs must be applied objectively without discrimination to all system users, and without prejudice to the entering into of long-term supply contracts in compliance with competition law provisions.
- Distribution of natural gas
The distribution of natural gas through medium and low-pressure pipelines is carried out through concessions or licenses granted by the Portuguese State through public tender. The entities operating the natural gas distribution grid at the date of enactment of Decree-Law no. 30/2006 of 15 February, have maintained their right to operate the natural gas distribution grid as concessionaires or licensed entities under an exclusive territorial public service regime.
Natural gas from the high pressure pipelines of the national gas transmission network is transported to a network of medium and lower pressure pipelines owned by local distribution companies, which deliver natural gas to end users.
Third party access to the distribution system must be ensured by the relevant concessionaires based on published tariffs applicable to all eligible customers, including supply companies, and applied objectively without discrimination among system users.
Some local distributors also carry out regasification in cryogenic facilities in limited capacities. In this case, the LNG is transported and stored to supply customers who are not connected to the national natural gas transmission network.
- Supply of natural gas
The liberalization of the natural gas supply commenced in 2007 (with respect to power plants) and is expected to be extended to consumers of over one million cubic meters of natural gas per year in 2008 and to consumers of over ten thousand cubic meters of natural gas per year in 2009. The activities of supply of natural gas are scheduled to be fully open to competition by 2010, subject only to obtaining the requisite licenses. Suppliers will be able to openly buy and sell natural gas in the open market or by means of bilateral agreements. Under the new regime, consumers are free to choose their supplier, and may switch suppliers without incurring any additional charges. A new entity, whose activity will be regulated by ERSE, will be created to oversee the logistics operations of switching suppliers.
Suppliers are subject to certain public service obligations and are required to ensure the quality and continuous supply of natural gas.
In addition, the role of the last resort supplier has been created until the liberalized market is fully efficient. This new role has been assumed by a wholly owned subsidiary of Galp for wholesale customers and by any other current concessionaires or licensed natural gas distributors within their area of coverage for retail customers, subject to licensing requirements.
- Operation of the natural gas markets
The natural gas markets are operated on an open market basis, subject to authorization to be jointly granted by the Minister of Finance and by the Minister responsible for the energy sector. The entity managing the organized market is also subject to authorization to be granted by the Minister responsible for the energy sector and, whenever required by law, by the Minister of Finance.