25/03/26
Methane law limits EU’s pool of gas suppliers: Eurogas
London, 26 March (Argus) — The EU's Methane Emission Regulation (MER) creates
"significant challenges for ensuring the flexibility, affordability and security
of the EU's gas supply", industry association Eurogas told Argus . The
legislation, adopted in 2024, aims to reduce methane emissions in the EU's
energy sector and from energy imports. It requires that from 2027 new and
renewed import contracts demonstrate that, at the point of production, the
producing country has rules equivalent to those of the EU on how to monitor,
report and verify information on methane emissions, while by 2028 methane
intensity will have to be reported, Eurogas summarised. By 2030, imports will
have to demonstrate compliance with the methane intensity threshold set by the
European Commission. Eurogas "fully supports" the MER's overarching goals of
reducing methane emissions and ensuring sustainable energy imports, with the law
representing an "important step in aligning climate ambitions with global energy
trade", it said. But the regulation's "timeline, uncertainties and
extraterritorial implications for importers" create significant challenges for
EU gas supply, a particularly acute problem as the EU seeks to replace all
Russian gas imports by 2027, Eurogas said. "Multiple challenges" such as the
equivalence of systems for monitoring, reporting and verification of methane
emissions, as well as the tracking of the origin and emission intensity of
deliveries need to be addressed, the association said, noting that "several of
the EU's suppliers have expressed major concerns regarding the MER". Ultimately,
by significantly increasing the administrative burden on both exporters and
importers, disincentivising the signing of long-term contracts, the MER may
result in firms turning more towards intra-EU spot trade on hubs, which is
"subject to its volatility and supply risks", Eurogas said. Compliance with the
regulation becomes particularly difficult in complex cases, such as in the US,
where gas can be produced by one company, transported by another, liquefied by a
third and imported by a fourth, making it extremely difficult to track emissions
across the entire value chain. This problem is compounded if gas is bought on a
liquid hub such as the US' Henry Hub, as is frequently the case with US LNG
tolling contracts, because there is no system for verifying the origin of gas
bought on a hub. From there, gas then frequently co-mingles in pipelines and at
the liquefaction facility, further complicating tracing efforts. Unless you are
an integrated company that controls the entire route to market, from production
to liquefaction to export, it is "very difficult to comply", Eurogas said.
Additionally, uncertainties regarding compliance with requirements yet to be
defined, liability risks and potential penalties as high as up to 20pc of the
importer's annual turnover, make it "difficult for parties to assess risks and
move forward with agreements", Eurogas said. Without concrete solutions in place
to deliver such tracking and monitoring, the regulation will "limit Europe's
potential pool of buyers" and is already "preventing certain gas supply
contracts from being signed". Eurogas therefore recommends adopting a "pragmatic
approach regarding regulatory equivalence and origin tracking, to ensure
compliance can be achieved without endangering Europe's security of supply and
avoid distortion between supply routes". Another consideration is that the MER
does not specify any direct EU funding to support the implementation of
necessary measures. These measures will "inevitably involve significant
investments" in advanced monitoring equipment, upgrades of existing facilities
to minimise emissions and administrative efforts needed for reporting, the
association said. When it comes to EU regulated entities, the regulation
clarifies that costs associated with such investments shall be taken into
account in tariff setting, subject to efficiency and transparency criteria. The
US Department of Energy in October requested the "initiation of an equivalence
determination process for importers/third countries" in order to "ensure the
continued reliable and stable supply" of gas from the US to Europe. Earlier this
month EU officials held technical talks with US firms to support "mutual
understanding" on implementation, the European Commission said. The "real
challenge" lies in the fact that the commission has not yet formulated the
methodology for calculating methane emissions, so the compliance of existing
third-party reporting "cannot be assessed", Eurogas said. It should be ensured
that the detrimental impact on current gas trading practices and on security of
supply "remains limited and to avoid market framework reforms in third
countries". Any solution must work in existing pipeline and LNG gas markets and
should be "efficient and effective with low cost to industry and consumers" to
enable large-scale adoption by the market, the association said. To this end,
Eurogas recommends that the possibility of relying on a voluntary certification
system based on book-and-claim, or alternatively an adapted mass balancing
approach, should be explored. Such an approach would imply accepting foreign
interconnected gas systems as a single mass balancing at a global level, where
the focus should be on the injections and withdrawals from such systems, rather
than on the tracking of the molecules or certificates and their trade within
such systems, the association noted. This approach would be necessary in order
to minimise the impact on trading and avoid market framework reforms in
producers' countries, it said. By Brendan A'Hearn Send comments and request more
information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All
rights reserved.
