Key facts
- The U.S. and Qatar, joined by Algeria and Nigeria, warned the EU that its methane regulation will cause a gas crunch and higher prices.
- Top energy officials from the U.S. and Qatar stated that compliance with the EU's methane regulation is impossible.
- The EU's methane regulation, adopted two years ago, requires tracking and reporting methane emissions from the wellhead to the LNG carrier.
- Brussels has delayed enforcement penalties until 2030, but suppliers are seeking the regulation's cancellation.
- The EU imports approximately 59% of its LNG from the United States, raising concerns about over-reliance on a single supplier.
The United States and Qatar have issued a stern warning to the European Union regarding its methane regulation, asserting that the policy will inevitably lead to a gas crunch and increased prices.
In a letter quoted by the Financial Times, top energy officials from both nations, including U.S. Energy Secretary Chris Wright and Qatari Energy Minister Saad al-Kaabi, stated that legal compliance with the regulation remains paramount, making exporters and importers unwilling to enter into agreements that violate EU law. They predicted significant supply and price impacts as a certainty.
The warning comes ahead of a crucial meeting where EU energy ministers are set to discuss the bloc's energy policies. Algeria and Nigeria, also significant gas suppliers to the EU, co-signed the letter.
The EU's methane regulation, adopted two years ago, aims to reduce greenhouse gas emissions associated with natural gas by requiring suppliers to track methane emissions from the wellhead to the liquefaction plant and LNG carrier, report them, and implement reduction measures or face financial penalties. The regulation, which began extending to all EU energy suppliers this year, has been met with strong opposition.
Both the U.S. and Qatar have previously voiced their unwillingness to operate under the regulation. Qatar had indicated it would cease selling LNG to the EU if the regulation persisted, while Secretary Wright described it as an impossible-to-implement, non-tariff trade barrier.
In response to the pressure, Brussels has partially conceded, stating that penalties will not be enforced until 2030. However, LNG exporters are reportedly seeking the regulation's outright cancellation, a sentiment echoed by some EU member states reluctant to incur the additional costs associated with low-methane LNG.
Wright argued that enforcing the regulation within the U.S. shale gas sector is physically impossible due to the complex, multi-company network involved in gas production and transport. Energy consultancy Rystad Energy, however, suggests that sufficient compliant natural gas is available globally, a claim that contrasts with the U.S. and Qatari assertions.
Bloomberg's Javier Blas reported that the EU imports approximately 59% of its LNG from the U.S., leading to concerns about over-dependence on a single supplier. Some analysts suggest the regulation's true purpose may be to reduce gas consumption by making purchasing conditions unpalatable, thereby enhancing the EU's energy security, a view that clashes with the concerns of European industrial energy consumers.