Gas slows down but still represents 10% of electricity production

The gas market in Portugal is reorienting itself, with a reduction in its role in electricity production and a greater dependence on maritime imports, in a context of accelerated energy transition», Paulo Monteiro Rosa, senior economist at Banco Carregosa, told Nascer do SOL.

And he points to the fact that this has seen a sharp contraction in 2024, particularly in the electricity generation segment, which fell 56% compared to the previous year. “This fall was reflected in a total consumption of 40.5 TWh [Terawatt-hour], the lowest since 2003, revealing a clear trend of slowdown in the use of natural gas in the energy sector, driven by the growing penetration of renewable energies and a record electricity import balance”. But Monteiro Rosa points out that despite the reduction in the electricity sector, conventional consumption (industry and other uses) recorded a slight growth of 2%, the first after four consecutive years of decline, which indicates, in his opinion, “some stabilization or recovery in demand outside of energy production”.

XTB analyst Henrique Tomé has a different opinion, noting that this market continues to account for almost 10% of all electricity consumption and production in the country in the first three months of the year. “Given that the price of natural gas remains low, it makes sense to use it to produce electricity. However, Portugal should always try to use cheaper alternative energy if it requires this possibility for two reasons: the cost issue and the environmental issue”, he told our newspaper.

A weight that does not convince Paulo Monteiro Rosa, when he says that we are facing the lowest production since 1979, totaling 5.1 TWh, but explains this trend: «The reduction was due to the greater availability of renewable energies and a record import balance of electricity (10.5 TWh), which supplied 20% of consumption».

Import weight

The gas supply was almost exclusively made through the Sines LNG terminal, with a notable dependence on suppliers such as Nigeria (53%) and the USA (41%). ERSE data indicate that until the end of March, this terminal carried out 10 unloading operations of LNG tankers, one less than in the same period of the previous year, and they came from three sources, with Nigeria (five LNG tankers) and the United States of America (four) standing out as the main suppliers.

It should be noted that Portugal is characterized by not having natural gas deposits, that is, there is no natural gas production in the national territory. The supply of natural gas to the Portuguese market is carried out through long-term take or pay contracts.

This means that natural gas arrives in Portugal via pipelines or by sea and is stored in dedicated facilities that allow it to be supplied to the transport networks under safe conditions. Between the transport network and the consumption facilities, there are distribution networks, which reduce the pressure and channel the natural gas flows to consumers.

According to the regulator, a total of 10.9 TWh of LNG was unloaded, an increase of 6.4% compared to the first quarter of 2024, but it explains that the monthly fluctuations in LNG unloaded at the terminal reflect the demand for gas, influenced by seasonal temperature patterns and weather conditions.

A scenario that leads the economist at Banco Carregosa to state that the entry of gas through the interconnection with Spain «was practically residual, which demonstrates a strong dependence on non-EU suppliers and a high centralisation of imports by sea», adding that «this configuration makes the Sines terminal a strategic point for the security and diversification of the national energy supply».

Russia loses importance

As for dependence on Russia in this area, it has been decreasing. “Exposure to Russian gas has been decreasing significantly, falling to approximately 4.4% in 2024,” warns Henrique Tomé.

Still, he recalls that the conflict generated pressure on global gas prices and volatility in energy markets, “affecting internal costs, mainly for the Eurozone countries with greater dependence, such as Germany”.

Paulo Monteiro Rosa, while acknowledging that we are facing a risk in relation to the Russian market and admitting that “the war exposed vulnerabilities”, also stresses that Portugal currently has a low dependence on Russian gas. However, he leaves a message: “The strong dependence on external imports continues to be a structural weakness, especially in contexts of global instability”.

In fact, the European Union has already assured that it intends to ban all imports of natural gas from Russia by 2027.

According to experts, this is a target that can be achieved. However, according to the economist at Banco Carregosa, a coordinated effort is needed to achieve this. “The European Union has already significantly reduced its dependence on Russian gas and wants to end all contracts by 2027. To achieve this target, it will be essential to diversify suppliers, strengthen infrastructure and overcome resistance from countries that are still dependent on Russia.”

Henrique Tomé, while acknowledging that Russian gas consumption has been decreasing considerably since the beginning of the war and the end of Nord Stream 2, states that this objective always depends on several factors, namely the capacity to accelerate the energy transition, renewable energies and improving energy interconnections between Member States.

What to expect from the next Government

Regarding the challenges facing the new government, Paulo Monteiro Rosa points to the continuation of the energy transition, with priority given to the production of renewable electricity and the reduction of the use of natural gas. “The goals include bringing forward 80% renewable electricity to 2025, integrating renewable gases (such as hydrogen and biomethane) into the grid and strengthening interconnections with Spain and France. The aim is to make the system cleaner, more stable and less dependent on imports,” he stresses.

Henrique Tomé also recalls that the previous Government was already discussing the Biomethane Action Plan 2024–2040, whose main objective was to create an internal market for biomethane, focused on the reconversion of existing biogas units and the construction of new infrastructures, with a view to its integration into the Public Natural Gas Network. «It is estimated that, with the implementation of this plan, Portugal will be able to replace between 9% and 10% of natural gas with biomethane by 2030. This topic could be discussed again, since the plan aims to reduce natural gas imports, establishing ambitious targets (with replacement of up to 19%) and promoting an integrated approach that promises to make a decisive contribution to the national energy transition», he tells our newspaper.