US LNG export developers face higher costs, trade hurdles on EU methane rules

US LNG exporters are optimistic that their product will continue to displace Russian gas in the EU market, but speakers at an industry event said the bloc's methane regulations have beenone of several obstacles.

Other hurdles include supply chain delays, said Jillian Evanko, president and CEO of Chart Industries, a company that supplies equipment and engineering services to LNG firms. The long lead time for turbines to power liquefaction equipment and heat exchangers at LNG facilities has been creating a bottleneck for LNG project developers, Evanko said at the May 8 event hosted by LNG Allies in Washington, DC.

"We're trying to help our customers" on where equipment is made to avoid tariffs on imports into the US, Evanko said.

Higher labor and material costs have "rippled through" the US LNG export sector and increased liquefaction fees for companies buying US gas, while costs from LNG competitors overseas have fallen in the past few years, said Jason Feer, global head of business intelligence at Poten & Partners, a consultant and brokerage firm. Trade tensions and US tariffs on steel and aluminum "will have an impact on costs as well," Feer said at the event focused on trans-Atlantic LNG trade.

The US Trade Representativesaid in April that LNG exporters would have to transport 1% of their exports on US-built ships starting in 2029, with the percentage increasing in phases over the subsequent decades. That could put US LNG companies at a disadvantage due to the limited number of US-built ships, but Commonwealth LNG supports the move if US-built ships materialize in time to meet the requirement, said Benjamin Dell, chairman of Commonwealth LNG and founder and managing partner at energy investment firm Kimmeridge.

In the EU, new methane regulations have been a concern and a frequent topic of debate for US LNG exporters. The regulations require a collection of methane emission data from individual producers beginning in 2027, while the US gas industry does not provide a clear compilation of emission data at that level, said Fred Hutchison, president and CEO of LNG Allies.

Hutchison said US Energy Department staff are meeting with EU counterparts in Washington to discuss the EU regulations, which he called "a trade barrier that needs to be reduced."

Third-party certification of the greenhouse gas emission footprint associated with US gas production is a growing business that can help US LNG exporters try to meet EU standards, Hutchison said.

Dell said Commonwealth and other producers are working with emission certification firm MiQ to show their emission footprint in a transparent and auditable manner. The US gas sector is committed to reducing methane emissions, and the EU regulations provide an impetus for EU buyers to look for more US LNG suppliers, he said.

LNG buyers in Europe who want the equivalent of net-zero emission LNG cargoes will have to pay more to cover the cost associated with certification and emissions tracking, Dell added. "I'm looking forward to expanding the relationship [with EU buyers]," he said.

US LNG has been "absolutely critical" for Europe to lower its use of Russian gas, and the European Commission presented its long-awaited roadmap for eliminating imports of Russian fossil fuel on May 6, said Laura Lochman, acting assistant secretary at the US State Department Bureau of Energy Resources.

Lochman said that while the Trump administration wants to increase US LNG exports, it could take years to iron out the wrinkles associated with measuring, reporting and verifying the methane footprint of US gas back to individual producers.

Georges Tijbosch, CEO of MiQ, offered a more optimistic time frame, saying companies could work out "traceability" of US gas molecules and meet the EU regulations in a matter of months.