INTERVIEW: EU methane rules spur curtailment of contract talks: Eurogas' Guth

Uncertainty surrounding the EU's methane emissions regulation has pushed European gas and LNG market participants to curtail some contract negotiations, according to the Secretary General of Eurogas.

"How do I assess the risks and liabilities for future compliance with rules that are yet unknown or where I simply don't know how to comply with them?" Andreas Guth told Platts, part of S&P Global Energy, in a recent interview. "Factoring that into the contract negotiations increases uncertainty quite significantly, and, in some cases, members simply haven't moved ahead with certain contract negotiations."

Guth agreed it is "critical" for the gas industry to boost data transparency, availability and credibility around methane emissions. "If we argue that gas will be part of the energy system for decades to come, it is something that we need to address," he said.

But, the EU's current regulation is "simply not up to the task," Guth said. Implementing the policy under the existing design and timeline is "not really realistic," he said.

Questions remain about how to comply with the regulation's obligations, according to Guth. For instance, he highlighted the challenge of proving the intensities of specific shipments moving through comingled gas streams.

"You need to inform who has been the producer of that molecule -- in many cases, our members may not know," Guth said. "We need to make sure that we can bridge that gap."

Guth's comments come after Eurogas and six other industry groups presented an action plan to address challenges with the methane emissions regulation in July.

The EU regulation aims to reduce energy sector methane emissions both in Europe and in global supply chains. It also includes a methane transparency requirement on imports.

Importers of natural gas, crude oil and coal are required to report annual methane emissions data, and starting in 2027 new import contracts must also meet the same monitoring, reporting, and verification standards as EU producers.

By Aug. 5, 2030, EU producers and importers will also have to comply with methane emission intensities that have yet to be set for contracts concluded or renewed after that date.

The EU has yet to outline the methodology for calculating producer-level methane intensities. Under the regulation, this is required by Aug. 5, 2027.

Storage

Another regulation shaping European gas markets has been the EU's gas storage requirements. Guth said he had "mixed feelings" about the recent revision to the regulation, adopted in July

While the revision provides added flexibility around meeting targets, Guth said uncertainty remains regarding implementation at the member state level. "There's a lot that still needs to be communicated by the individual member states once the actual regulation is actually in force," he said.

The revised regulation will become law when it is published in the EU's Official Journal. This "should happen either this week or next week," a European Council official told Platts Sept. 3.

Looking ahead, Guth said the question of whether the EU should continue maintaining gas storage targets is "critical" to consider as part of revisions to the EU's security of supply framework.

"What are the benefits [of the targets], what are the costs, and is it really necessary to continue with the current framework considering that the market will have evolved quite significantly?" he said.

New global LNG capacity and added EU import capacities have shifted the energy landscape since Europe faced supply shocks following Russia's invasion of Ukraine, according to Guth.

"That fundamentally changes the picture compared to 2022 when Europe was very much unprepared," he said.

Platts assessed the TTF front-month gas price at Eur32.525/MWh Sept. 4, up 1.3% on the day.