Portugal Oil Security Policy

Portugal’s energy sector is dominated by imported fossil fuels. The largest energy sources in total energy supply (TES) are oil, mainly for road transport, and natural gas, for electricity conversion and industrial processes. While wind and hydro generation accounted for a small portion of TES, electricity generation from these sources has recently increased.

Domestic transportation accounts for most of Portugal’s oil demand, followed by international bunker fuels, industry, and minor shares of services/other, residential, and heat and electricity generation. The country’s refining capacity of around 330 thousand barrels per day (kb/d) exceeds domestic demand, which has turned Portugal into a net-exporter of oil products since 2012. All-time high net-exports stood at 83.0 kb/d in 2017, but they have dropped since then.

The combination of public stocks and obligated industry stocks is a key component of Portugal’s oil emergency policy, with stocks held domestically and in other European countries. Portugal is compliant with the IEA 90-day stockholding obligation without any recent critical issues in meeting the obligation. When mobilising reserves during an oil disruption, Portugal gives priority to the use of petroleum products, considering the time it takes to refine crude oil.

Organisation

Portugal’s oil 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 optimising available energy resources based on decision-making of the government. All public and private entities have the duty to collaborate on applying the measures, and such entities should inform and clarify the population on the type and purposes of the measures to be implemented.

In case of an energy crisis, the Minister for the Environment and Climate Action has the competence to authorise the use of oil security reserves and/or to impose restrictions on demand, particularly for prioritising oil products allocation. The Minister will draw up a contingency plan and activate emergency civil planning crisis structures for the application of the measures. Before making a decision, the Minister must consult with the Prime Minister and the Council of Ministers. Any decision by the Minister must take into account the national interest, as well as any obligations under international agreements.

ENSE is the Portuguese Central Stockholding Entity (CSE) operating under the supervision of the government with responsibility to purchase and manage strategic oil reserves of crude oil and refined products. The Emergency Plan for the Mobilisation of Oil Reserves and Petroleum Products (also called PIURS – Plan for Intervention and Use of Security Reserves) was elaborated by ENSE in 2019 to organise competences, functions, and decision procedures and processes in a scenario of energy crisis. ENSE ensures the operation of PIURS in the case of an event causing a serious disruption by mobilising emergency reserves in an effective and efficient manner. To implement the plan in timely and phased manners, the following different risk levels are considered in an event of oil contingency.

For local supply disruptions, the government maintains a list of strategic retail fuel stations, i.e. Strategic Network of Supply Stations (REPA) that can be used to supply emergency response services and other priority users. These stations are obliged to reserve a certain amount of diesel, gasoline, and LPG for the exclusive use of priority users. The stations were selected based on their location, accessibility, type of products and storage capacity to ensure adequate geographic coverage.

The National Authority of Emergency and Civil Protection (ANEPC) is one of the core bodies of the Portuguese National Emergency Strategy Organisation (NESO) structure. ANEPC assumes the primary role in the prevention and response to major accidents and disasters, the protection of populations, the coordination of civil protection agents, and the planning and coordination in the area of emergency civil planning with a view to cope with crisis or war situations. ANEPC is the umbrella organisation for civil emergency and coordinates emergency response at national level. The responsibility for the civil protection policy lies with the government.

On a practical level for crises or disruptions in the oil sector, DGEG (Directorate General for Energy and Geology) and ENSE are responsible for energy emergency planning. The DGEG is the Portuguese public administration branch responsible for ensuring planning of supply, production and use of energy resources and supporting the Minister for the Environment and Climate Action in making decisions, particularly in crisis or emergency situations. In case of an energy emergency, a crisis cell may be activated under the Minister.

During a supply crisis requiring emergency stock releases, the Minister for the Environment and Climate Action can order the release of compulsory oil stocks to safeguard the national economy or to participate in IEA collective actions. The decision-making process is expected to take 48 hours and in theory stocks could be released immediately thereafter.

At all stages, priority is basically given to the use of petroleum products, considering the time it takes to refine crude oil. The release of industry stocks is triggered by the government decision to lower the mandatory stockholding requirements; industry can then reduce its stockholding by selling oil on the market. The release of public stocks is based on offering specified amounts for loans or for sale (at prevailing market prices). Loans are the preferred option, and sales should only be used if there is no alternative or if it is more useful for the normalisation of the oil sector in the wake of a crisis.

Release of public and industry stocks that are commingled with commercial stocks would be made available through the normal logistical chain. For stocks held abroad under bilateral agreements or tickets, ENSE estimate that delivery to Portugal would require a lead time of 5 to 10 days. Finally, reserves stored at ENSE’s own facility are considered the last line of defence in a crisis situation, and should only be used if there is no other alternative available.

Emergency oil stocks

Portugal meets its IEA and EU stockholding obligations by requiring that oil industry operators hold two-thirds of the EU obligation (i.e. 60 days of net imports), while ENSE is obliged to hold the remaining one-third. For this, ENSE maintains strategic reserves of crude oil and petroleum products in rented or in its own facilities.

ENSE is a public entity, under the supervision of the Ministry of Environment and Climate Action, and is also responsible for the sale of stocks during an energy supply crisis. The Ministry has three main responsibilities related to stocks: defining the obligations to build and maintain reserves and setting the conditions under which the stocks can be used during a supply crisis; authorising the sale of surplus reserves held by ENSE (should such an occasion arise); and approving the fee that companies have to pay to ENSE to maintain its stocks. All ENSE costs relevant to the emergency stockholding system are covered by industry operators.

ENSE holds 7.0 mb of domestic agency stocks consisting of 57% crude oil and 43% refined products. Portuguese oil industry holds 17.0 mb of domestic industry stocks consisting of 15% of crude oil and 85% of refined products. In addition to these stocks, a total of 3.1 mb of oil stocks (mostly public) were held in other European countries, whilst Portugal also holds stocks for Spain and the United Kingdom.

Most of the public and industry oil reserves are commingled with commercial reserves at the main logistical storage facilities in Portugal. Only a small part (diesel managed directly by ENSE in its own facilities) are segregated for emergency functions. In accordance with the Portuguese law, all obliged operators are required to report the status of their reserves and the location of their stocks on a monthly basis, and to identify proper response options for effective mobilisation of oil reserves in an oil crisis situation.

Oil demand restraint measures

Portugal’s demand restraint measures were legally formalised by the Decree Law on Energy Crises (DEC), which specifies a set of potential measures, both persuasive and compulsory.

According to the DEC, demand restraint measures should initially aim to persuade the population to reduce energy consumption through information campaigns, including media awareness campaigns, publication of leaflets and explanatory guides, and display of posters in public locations.

If further action for oil demand restraint is required, the following compulsory measures are envisaged:

• restrictions on the use of passenger cars (e.g. driving bans, prohibition on the use of recreational vehicles and sports events with motor vehicles or reduction of speed limits)
• volume restrictions placed on the sales of road transportation fuels
• encouraging the use of public transport and the sharing of private transport
• controlled rise in fuel prices
• restrictions on the use of non-priority equipment (e.g. electricity production when there is an alternative, oil use in non-critical industrial processes)
• setting a list of strategic retail fuel stations (REPA) useful to identify and meet the needs of priority entities.

Fuel switching could also be an alternative option to reduce oil demand, but there is no formal mechanism to enforce a fuel switching obligation. Fuel switching depends on the possibility for the operators/companies in industrial processes to take that decision (considering technological options and their feasibilities from a cost-effectiveness perspective).