Gas execs at CERAWeek grapple with coming EU methane rules

(Houston, Texas) — Oil and gas executives gathered at CERAWeek tried to figure out how to comply with new European methane regulations, which are being phased in over the next few years.

Beginning in January 2027, all natural gas that enters the European market will need to comply with European standards on measurement, monitoring, reporting, and verification (MMRV).

European importers of gas are the ones that have to comply, but they will require this information from upstream producers from around the world.

By August 2028, gas imported into the EU will need to report methane intensity levels. And by 2030, that gas will need to meet specific limits on methane intensity. The rules only apply to upstream producers, not to pipelines or LNG facilities.

At the CERAWeek conference in Houston this week, there were differing opinions from conference attendees over how onerous EU methane regulation will be, although most speakers recognised that there was no turning back.

“Methane emissions from oil and gas continue to be a challenge to the viability of the product,” said Mark Brownstein, senior vice president of energy transition at EDF. “This issue is here to stay.”

But there have been some grumblings from the U.S. oil and gas industry. Ahead of the conference, U.S. gas executives have met with EU officials in closed-door talks over methane.

“We can’t have the European Union and the U.S. trying to do something different, because they’re interpreting the rules completely different,” ConocoPhillips CEO Ryan Lance said.  “Europe’s trying to drive a different end game than what the U.S. is trying to drive. So that creates a lot of problems.”

At the same time, others argued that the industry can not only comply with the rules, but differentiate themselves from poor operators.

“We have long advocated for rules like this,” said Matt Kolesar, chief environmental scientist at ExxonMobil. “Everyone is aligned with the spirit of the rule. We just have to work through some of the mechanics in the short term.”

He added that he was pleased to see the EU roll out a specific standard for methane, instead of having it lumped into broader decarbonisation efforts.

The “bulk” of ExxonMobil’s Permian basin operations are under continuous monitoring and have low methane leaks, Kolesar said.

Big “opportunity”

Georges Tijbosch, the CEO of MiQ, a methane monitoring group that issues certifications to gas producers, said at CERAWeek that the EU regulations are a big “opportunity” for American oil and gas companies to demonstrate that there are low methane emissions at oil and gas sites inside the United States.

“We have now already certified 23 [billion cubic feet per day] in the U.S., which is three times more than what Europe imports from the U.S.” Tijbosch said. He said that the U.S. is managed much better than other basins around the world, and complying with EU methane regulations is a chance for the U.S. industry “to shine,” and also to pressure other countries to improve their operations.

Critics have pointed out that gas certification schemes that allege to demonstrate minimal methane emissions have problems, including methane emissions that go undetected. More broadly, the U.S. is the largest emitter of methane from oil and gas operations in the world. Methane emissions at oil and gas sites are routine, particularly in the Permian basin where so much of the gas that feeds Gulf Coast LNG terminals comes from. Meanwhile, LNG sites themselves also leak methane.

But MiQ sees a way for gas producers to differentiate themselves, and create a market for gas that comes from low-methane-emitting sources.

The problem is that once a gas driller puts gas into a pipeline network, it becomes blended in with gas from other producers. That gas mix is then sent to an LNG site and exported, and the original source of those molecules is impossible to discern.

The EU has not spelled out the details on how importers can prove the origin of their gas, or how they can demonstrate that it comes from a producer with low-methane emissions. With the details missing in the regulation, that “creates an opportunity for the industry” to define how the system might work, Tijbosch said.

MiQ envisions a programme that it calls “regional mass balancing,” where methane emissions from a company are compared against a basin average. Third-partner monitors, such as MiQ, issue certificates demonstrating emissions that were avoided. The European importers can use the certificates to comply with EU regulations. It would be akin to a market for renewable energy credits.

Tijbosch cited a pilot deal that German utility Uniper recently signed with EQT, one of the largest gas producers in the U.S. EQT will deliver 4 billion cubic feet of gas, equivalent to one LNG cargo. They hope it can be a proof-of-concept of sorts, and they are pressing European regulators to authorise such a programme as a way to comply with the European methane regulation.

Fred Hutchison, President of LNG Allies, a lobbying group, said that the U.S. LNG industry is “virtually unanimously committed to solving our part of the methane emissions issue as fast as possible.”

“I think that by the end of this decade, the oil and gas industry in the U.S. will have largely gotten its arms around the methane issue,” he said.

He said the U.S. LNG industry is committed to working with the European Commission on methane regulation, but that “sister organisations in Brussels” are more opposed. “The European side of the industry is looking to delay this,” he said.

Part of the issue is that the specific limits on methane intensity have not been worked out yet, and will come at a later stage. That is complicating commercial talks between buyers and sellers.

“We don’t have all the details. We don’t even have all the competent authorities in place. Specifications are not clear yet,” said Gregor Pett, CCO of global analytics at Uniper.

He said it is difficult to sign contracts for U.S. LNG while the specifics of the European methane regulation are still up in the air.

“You can’t negotiate contracts until this clear.”

(Writing by Nick Cunningham; editing by Sophie Davies)