European Commission rules out changes to Methane Regulation
At a time of turmoil in global gas markets, the EC has said it won’t change its Methane Regulation but may introduce “flexibilities.”
The European Commission has ruled out making any changes to its Methane Regulation, which would require imported gas to meet strict methane intensity targets.
European Commission energy spokesperson Anna-Kaisa Itkonen said at a daily press briefing on Friday that “we’re not planning to reopen or amend the methane regulation,” according to a Euractiv report. “This would bring more uncertainty at this stage,” she added.
However the EC is expected to issue recommendations to ensure that the penalties each EU government has to put in place under the Methane Regulation won’t put oil and gas supplies at risk, the report noted.
The EU Methane Regulation aims to require gas imported into Europe to come from production sites that have minimal levels of methane emissions. While still being designed and implemented, a threshold of 0.2 percent methane intensity limit has been the main benchmark under discussion. By 2030, gas importers would have to demonstrate cargoes entering Europe meet these standards, or face fines.
Yet last Thursday the European Union appeared to be backtracking on its Methane Regulation with top EU officials relenting to industry pressure, signalling a significant weakening of both the scope of its regulation and the enforcement penalties for non-compliance.
At an April 9th conference hosted by Eurogas, a top gas industry lobbying group, Ditte Juul Jørgensen, director-general for energy at the European Commission, told attendees that the Commission would be introducing “flexibilities” to the Methane Regulation.
For companies unable to comply with the regulation, the Commission would ensure the penalties do not “constitute a problem for security and supply and that penalties have to be proportionate,” Jørgensen told the Eurogas audience.
A second way the regulation will be watered down is through the monitoring, reporting and verification mechanism. Instead of companies needing to demonstrate that they can trace the supply chain for the imported LNG, the industry will only need to demonstrate that a certain portion of a country’s energy production is monitored. There will be no need to “track to the well, to the cargo, to the molecule,” Jørgensen said.
Eurogas said it “welcomed” the Commission’s forthcoming decision to weaken the regulation.
Abandoning the concept of monitoring the gas supply chain to ensure high standards, coupled with weakening enforcement penalties, risks substantially undercutting the efficacy of the regulation.
Methane emissions are an enormous problem in the global gas supply chain, and especially so in the U.S. Permian basin, a major source of gas for the European market.
A recent joint investigation between Gas Outlook, Drilled Media, and The Guardian found that even gas sourced from “certified” sites in the Permian were emitting significant volumes of pollution. Obtaining a top certification grade relies very heavily on self-reported industry data.
The findings raise red flags about one of the largest sources of imported LNG for the EU, including from producers claiming to operate at high standards.
If the EU weakens the Methane Regulation, there will be even less visibility into methane emissions from U.S. LNG, and little incentive for drillers to clean up their act.
The Commission did not respond to questions from Gas Outlook.
Iran war
The U.S.-Israeli war on Iran has now resulted in the largest oil and gas supply disruption in history. The crisis has demonstrated the extreme vulnerability facing the EU, which depends overwhelmingly on imported oil and gas for industry, heating, and transportation. European policymakers are scrambling to contain the damage, but have not formulated a coherent response.
The EU sources about 8 percent of its LNG imports from Qatar, and analysts don’t anticipate severe shortages. Instead, prices may remain sharply higher for an extended period of time as Europe will need to outbid Asian economies for spare LNG cargoes.
That could prove costly. A doubling of gas prices would add $100 billion to European import bills over the next 12 months.
Countries most exposed to the crisis are those that burn more gas for electricity, such as Italy and Ireland. Those that rely more on renewables and nuclear power, such as Spain, are seeing more modest price impacts.
That underscores the need to rapidly scale up renewable energy, a point that some European officials have made.
“The only policy for us long-term is to get rid of our dependency on fossil fuels,” Dan Jørgensen, EU Commissioner for Energy and Housing at European Commission, said in early April.
In March, he gave a speech citing multiple historical oil and gas disruptions — Suez in 1956, the oil embargo in 1973, Russia’s invasion of Ukraine in 2022. And now the Strait of Hormuz.
“And once again, in Europe, energy prices have gone up. Dear friends, when will we learn? And if we do not learn, who else can we blame?” Jørgensen said. “Once again, our citizens and businesses have been exposed to the volatility of fossil markets.”
His response: “We must double down on our path to energy independence.”
Yet, watering down the Methane Regulation with the intent to facilitate new LNG contracting would lock Europe into long-term contracts, extending fossil fuel dependence. Deals typically span 20 years, although shorter deals have become more common.
“Risks to Europe’s energy security stem from its dependence on fossil fuel imports, not from regulation that demands transparency from suppliers,” said Ana Maria Jaller-Makarewicz, lead European energy analyst at the Institute for Energy Economics and Financial Analysis.
Experts argue that loosening requirements on the gas industry risks repeating the same mistakes made during past crises, as Jørgensen recently warned.
“As gas suppliers are leveraging the war in Iran as a pretext to push for the weakening of EU standards, Europe needs to retain the agency to define and enforce the terms,” said Pauline Heinrichs, lecturer in War Studies at King’s College London. “This also means not deregulating the very sector that is causing the crisis.”
“Maintaining robust EU methane rules not only safeguards strategic autonomy but ensures we don’t respond to this crisis by locking in more fossil fuels and weakening regulations around the very sources that produced it,” Heinrichs added.
(Writing by Nick Cunningham; editing by Sophie Davies)