Regulation of natural gas pipeline transportation and storage

Ownership and infrastructure

Describe in general the ownership of natural gas pipeline transportation, and storage infrastructure.

Portugal has two natural gas storage facilities: the Carriço underground storage – with a maximum working volume of 300 million cubic metres of natural gas, a nominal daily withdrawal capacity of 7.14 million cubic metres and a daily injection capacity of up to 2 million cubic metres – and LNG storage at the Sines terminal, with a combined storage capacity of 390,000 cubic metres, and a storage capacity of roughly 240 million cubic metres of natural gas.

Transportation activities and storage (subterranean storage and LNG storage at the Sines terminal) are exercised according to a public service concession regime. According to this regime, the ownership of transportation and storage assets belongs to the concessionaire during the concession’s period, being transferred to the state at the end of the concession.

Natural gas pipeline transportation is wholly owned by Redes Energéticas Nacionais (REN), which is the national network concessionaire. Subterranean storage facilities are currently owned by REN Armazenagem (wholly owned by REN) and Transgás Armazenagem (a company within Galp). REN Atlântico (wholly owned by REN) owns the facilities for the reception, regasification and storage of LNG.

Transportation and storage operators are subject to requirements of direct and indirect unbundling from other activities of the National Gas System (SNG).

Regulatory framework

Describe the statutory and regulatory framework and any relevant authorisations applicable to the construction, ownership, operation and interconnection of natural gas transportation pipelines, and storage.

Transportation and storage activities are exercised according to a public service concession regime. Transport activity is performed exclusively by one company in the whole continental Portuguese territory: REN Gasodutos is currently the only transport network operator. REN Armazenagem and Transgás Armazenagem are the subterranean storage operators. REN Atlântico is the operator of the Sines terminal. All these activities are regulated by DGEG and ERSE. The regulation includes supervision, namely of the enforcement by the operators of the legal and regulatory provisions applicable to the concession contracts (which are, mainly, in the competence of the Directorate General for Energy and Geology (DGEG)) and the promotion of competition between operators to assure access to the networks in equal circumstances (competence of the Regulatory Entity for Energy Services (ERSE)).

Projects involving construction of natural gas transportation pipelines and storage facilities are subject to an approval from the government and to the DGEG’s licence. Civil works are subject to a licensing procedure (including environmental licensing) involving several administrative entities (namely, municipalities).

To enforce compliance with its decisions, the regulators (the DGEG and ERSE) promote administrative and infringement procedures and apply fines and ancillary sanctions. For this purpose, the entities have broad powers, in particular to require additional information from the operators, to proceed to site inspections or question representatives of the operators and to seize documentation and equipment. In addition, these entities may communicate to other authorities any situation that may give rise to any other infringement procedure concerning other matters.

Land rights

How does a company obtain the land rights to construct a natural gas transportation or storage facility? Is the method for obtaining land rights to construct natural gas distribution network infrastructure broadly similar?

The transportation network and storage facilities are public concessions granted by the state and therefore are subject to a specific regime, namely concerning rights for the use of the land.

The approval of projects grants the party the right to use the public domain or assets and goods belonging to the state and the municipalities for the installation of storage facilities or passage of integral parts of the network, as well as to request the expropriation by urgent public utility or the establishment of administrative easements regarding immovable assets necessary for the installation of the network or storage facility.

The method for obtaining land rights to construct natural gas distribution network infrastructure is broadly similar to what is mentioned above.

Access

How is access to the natural gas transportation system and storage facilities arranged? How are tolls and tariffs established?

Access by third parties to the natural gas infrastructure (eg, the storage facilities infrastructures or transmission network) is one of the cornerstones of the SNG. As a result, it is the operator’s duty to grant all system users access to the infrastructure on a non-discriminatory and transparent basis.

Right of access to the infrastructure is granted by entering into a written agreement regarding the use of such infrastructure. Pursuant to these agreements, operators have the right to receive compensation for the use of their facilities and inherent services. This compensation is set out by ERSE in the Tariffs Regulation specifically for each type of infrastructure. Setting out regulated tariffs assures not only equal treatment for the infrastructure users, avoiding the risk of discrimination between them, but also that the amount of the tariffs is not subject to over-inflated increases defined by the relevant operators as a consequence of the networks being natural monopolies.

Decree-Law No. 230/2012 opened up the possibility of concessions for underground storage that benefit from a system of negotiated access.

Interconnection and expansion

Can customers, other natural gas suppliers or an authority require a pipeline or storage facilities owner or operator to expand its facilities to accommodate new customers? If so, who bears the costs of interconnection or expansion?

As a general principle, operators may reasonably refuse to grant access to their infrastructure based on a lack of capacity or lack of connection.

As a consequence of the transposition of Directive 2009/73/EC, substituted by Directive 2019/692/EC, the transmission system operator was given the obligation to elaborate, every two years, a long-term plan for the development of transportation and storage facilities, as well as the reception, storage and regasification of the LNG system. The current and predicted demand of customers is a key factor in the elaboration of this plan, which is approved by the government. Operators must comply with the terms and deadlines stated in the plan, with this obligation being supervised by ERSE.

Further, the government has the power to require operators to expand the transportation and storage facilities as well as the reception, storage and regasification of the LNG system, in situations mentioned in the concession contract.

Additionally, the transportation system operator has the obligation to undertake necessary improvements to the infrastructure, directly bearing the costs of that investment, whenever it is economically viable. In any case, the operator is compelled to perform the investment whenever there is a potential client interested in and willing to pay for it.

The costs of this expansion are taken into account in the determination of the regulated tariffs.

Processing

Describe any statutory and regulatory requirements applicable to the processing of natural gas to extract liquids and to prepare it for pipeline transportation.

Not applicable.

Contracts

Describe the contractual regime for transportation and storage.

Transport and storage activities are regulated activities. Therefore, the general terms and conditions of contracts for the use of infrastructure are approved by ERSE.

These contracts are between the national gas transportation system operator and the market agents and are valid for one gas year (the period from October to September of the following year), and shall be automatic and successively renewed for equal periods.

Some conditions include information for access to the national gas transportation system, quality service and intervention at the point of consumption, among others.