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INTERVIEW: EU methane emission rules key to gas, LNG, hydrogen future: EC

Highlights

EU methane strategy due September/October

Russian pipeline gas, US LNG to come under scrutiny

Formal legislative proposals planned in 2021

Brussels — The European Commission's plans to address methane emissions will have a major impact on the EU's natural gas, LNG and potential fossil-based hydrogen suppliers, according to a senior EC official.

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Methane is a potent greenhouse gas, and most leaks happen before the natural gas or LNG reaches the EU, so a new EU policy on methane emissions could have far-reaching impacts on the global gas market.

"If this problem is not solved, natural gas will have a very, very difficult future, and in the short term, not the long term," the EC's deputy director-general for energy, Klaus-Dieter Borchardt, told S&P Global Platts in an interview.

"Methane emissions are even more devastating than CO2 emissions. And there's no common methodology for measuring them. There's a very low level of reporting and there's no verification," he said.

The EC plans to set out initial thoughts and possible voluntary initiatives for tackling these issues in an EU methane emissions strategy due at the end of September or early October.

It wants to follow this up with formal legislative proposals mid to late next year to ensure compliance.

These measures are part of its European Green Deal strategy for the EU to become climate neutral by 2050.

Russian gas, hydrogen

The EC's decarbonization plans for the EU focus on switching more sectors to electricity, improving energy efficiency, and replacing fossil fuels with hydrogen and other low-carbon gases and liquids.

"This could have a direct impact on Russia and other gas exporting countries," Borchardt said.

Russia is the EU's biggest natural gas supplier, and is also looking at producing "blue" hydrogen from natural gas with pyrolysis to sell to the EU.

Its almost-complete 55 Bcm/year Nord Stream 2 pipeline to Germany is capable of flowing hydrogen, but Borchardt said that it would probably be too expensive and impractical to transport hydrogen such long distances.

A more likely option is that Russia would transport the natural gas to Europe as usual, and use pyrolysis to turn it into blue hydrogen closer to the demand centers.

"Objectively speaking, it's the most cost-efficient way to do it, to make full use of the existing infrastructure," Borchardt said. "The problem here, of course... is the methane emissions."

It is in Russia's interests, he said, to join forces with other gas exporting countries, including the US, to work on reliable, standardized methane emission reporting.

"We want to bring them on board. They are not yet there," he said.

US LNG, Norwegian gas

The EC wants to keep on good terms with all its existing fossil energy partners, even as it switches its focus to renewables.

US LNG, for example, is likely to remain a good supply source for the EU over the next five to 10 years, helping to stabilize markets and drive prices down, Borchardt said.

But its carbon footprint, along with other LNG sources, is higher than pipeline gas, and so LNG suppliers face a similar decarbonization challenge to remain relevant in the EU market, he said.

The EC recognized in its EU hydrogen strategy published July 8 that blue hydrogen has a "transitional role" in creating demand that could later be met by green hydrogen made from water and renewable power.

"As long as we are working with low-carbon hydrogen, which is fossil gas plus carbon capture and use/storage, pyrolysis or using water and grid electricity, then Russia and Norway will still be possible partners," he said.

Norway would probably use CCUS, while Russia would probably use pyrolysis.

Borchardt could not say how long this transitional role would be needed, as that depends on how alternative renewable options develop.

"What we can say is yes, we want to have as much renewable hydrogen in our system as we can get. But if we are not scaling up the hydrogen production and consumption now, we will never get to greening this hydrogen," he said.

Green NGOs have criticized the EC's hydrogen strategy for not setting a clear end date for fossil gas use.

They argue this puts the EU's wider climate goals at risk.