Government creates strategic natural gas reserve

  • Lusa
  • 14 October 2022

The government has decided to create a strategic reserve of natural gas and establish extraordinary and temporary measures for reporting information and ensuring the security of gas supply.

Portugal’s government has created a strategic reserve of natural gas and established extraordinary and temporary measures for reporting information and ensuring the security of gas supply, to be in force for two years, according to a law published on Friday.

“It cannot be ruled out that extraordinary events may jeopardise the guarantee of natural gas supply to the National Gas System, which is why it is important to preventively establish exceptional and temporary measures,” the government explained in the preamble to the decree-law published in the Diário da República.

The decree-law determines that the costs associated with the constitution and maintenance of the strategic reserve, including the use of regulated infrastructures, are fully borne by market-regulated gas suppliers and last resort retail suppliers through monthly payments to be made to the National Entity for the Energy Sector (ENSE), based on the actual consumption of its customer portfolio.

“In the event of a disturbance in supply security, it is up to the member of the government responsible for energy, on the proposal of the overall technical manager of the system, to determine the mobilisation of the strategic reserve,” the law states.

ENSE may sell part of the strategic reserve with the authorisation of the member of the government responsible for energy, but the sale of the strategic reserve at a price lower than the average acquisition cost still requires authorisation from the finance minister and must be duly justified, according to the new law.

In the preamble of the law, the government begins by recalling that the armed conflict in Ukraine has caused instability in the energy sector, posing additional challenges not only with regard to prices but also in the field of security of gas supply.

Additional reporting obligations and a last resort mechanism to guarantee supply by the National Gas System supplier, the largest agent in terms of volume of gas traded, are provided for in the law, which establishes the category of ‘dominant operator’ in the National Gas System, as well as the procedure applicable to the identification of these operators, which may, by means of a decree from the energy authority, be subject to specific obligations.

Among these obligations are the ceding of contractual supply capacity underlying contracts for the acquisition of natural gas entered into with entities from third countries to the European Union and which are long-term take-or-pay contracts, the imposition of the diversification of supply origins and also the possibility of an obligation to enter into a market making an agreement in the organised gas market with the obligation to submit purchase and sale offers.

“The determination of these obligations depends on an evaluation exercise of necessity, proportionality and adequacy”, explains the executive in the diploma.

The government also established an additional safety reserve aimed at guaranteeing the supplier’s ability to comply with its obligations to the respective customer base, explaining that they are different from the safety reserves that are calculated based on the forecast consumption of the so-called ‘protected consumers’.

“In addition to these consumers, the additional security reserves provided for in the present decree-law are based on the entire customer base of each supplier, considering the public interest of guaranteeing the security of supply”, it said.

Furthermore, also in the field of gas supply security, the government has decided to reinforce the National Gas System’s reserves by “adding a strategic reserve” owned by the State to the existing security reserves.

Also in this context, the decree-law creates a competitive mechanism for the free participation of large end consumers of gas with the aim of ensuring the placement on the market of the surpluses voluntarily generated by the reduction in consumption of these consumers and which will be triggered by the overall technical manager of the system when there is a supply failure as a result of a default by a supplier of the National Gas System, which cannot be remedied by the acquisition of the gas necessary for this purpose on the market organised by the overall technical manager of the system.