Oil and gas industry jittery as EU nears deal on methane leakage

Oil and gas producers warn the EU’s draft methane regulation will be “impossible to implement” in its current form as legislators near completion of draft new rules to crack down on methane leaks from fossil fuels.

Methane can leak from fossil fuel infrastructure during extraction, transport or storage, and has more than 80 times the global warming power of CO2 in the first 20 years after it reaches the atmosphere.

Tabled in December 2021, the EU’s draft regulation aims to reduce methane leaks from the energy sector and obliges the industry to detect and repair all methane-leaking components.

Representatives from the 27 EU member states and the European Parliament are meeting in Brussels on Tuesday (14 November) for a potentially decisive round of talks to finalise the methane rules.

But the International Association of Oil & Gas Producers (IOGP) said it was “extremely concerned” about the regulation, saying some requirements in the draft EU rules “rely on technologies that do not exist”.

“The EU Methane Regulation is at risk of being impossible to implement by the European oil and gas industry because of certain requirements that are disconnected from reality,” said Nareh Terzian, head of strategy and communications at IOGP Europe.

Campaigners, for their part, sing a different tune. “As the world’s largest natural gas importer, the EU can no longer outsource pollution while claiming climate leadership,” warns the European division of the Environmental Defense Fund, a US-based green advocacy group.

“Because it stays in our atmosphere for less time, reducing methane is one of the fastest and most efficient ways to slow down global warming and stabilise our climate. But we must act now,” EDF said.

Remaining issues: imports and repair

The EU talks, scheduled on Tuesday evening, will focus on remaining issues such as tackling methane from imported oil and gas, as well as repairing leakage from infrastructure.

But the proposed threshold for leak detection and repair, as proposed by the European Parliament, is “disproportionate and nonsensical,” Terzian warned.

Parliament says repairs must be undertaken as soon as methane leaks reach 1 gramme per hour, a threshold ten times stricter than the original proposal tabled by the European Commission.

EU member states, for their part, pulled in the opposite direction by diluting the Commission’s proposal ten times, resulting in proposed thresholds that range from 1 to 100.

The two also diverge on underground and underwater thresholds, with Parliament three times as ambitious as EU countries.

The two sides must agree on an identical text before the law can be approved. 

There are also tricky details to iron out, like the distancing of sensors from potential leaks or the specifications of leak-detection systems, which may determine the final shape of the EU’s methane regulation. 

EU countries want detectors to be placed “as close as possible” to leaks on the surface while underground leakage shall be detected once the methane hits the air. For all other set-ups, like drilling below the seabed, the “best commercially available” systems should be used, EU countries recommend.

This fits with the industry’s demands. Stricter obligations for sub-sea tracking, as put forward by the European Parliament, should be scrapped “because there are no technologies to quantify the leaks in a subsea environment in a consistent manner,” IOGP insists.

The draft EU law also cracks down on methane flaring and venting, where gas is either burned for safety reasons or simply released into the atmosphere.

EU countries are asking companies to be 99% efficient in their flaring, up from the 98% that is standard today.

The European Parliament wanted to make this increase in efficiency mandatory from 2026, forcing producers to replace all the relevant parts in their operations. This was rejected by EU countries, who argue that upgrading replacement parts should suffice.

According to IOGP, upping efficiency to 99% would require “the replacement of numerous flare stacks” which would “very likely lead to a net negative environmental impact.”

Imports

A key battlefield during negotiations relates to EU rules on methane leakage from imported oil and gas, an issue which is commonplace in countries like Russia, Ukraine, or Azerbaijan which have ageing infrastructure.

There are two main issues at stake: how best to track methane emissions associated with energy imports, and when to begin cracking down on the worst offenders.

Repairing leaky infrastructure largely pays for itself, according to the International Energy Agency (IEA), which estimates that 260 billion cubic metres of gas were wasted in 2021 in this way – almost half of the global LNG market – at a time when the world was going through a global energy crunch.

“The bloc’s external ‘methane footprint’ is up to 8 times higher than its domestic emissions and worse still, we know through scientific measurements that in most places, emissions are underreported,” the EDF added.

However, the 2022 energy crisis triggered by the Ukraine war is still fresh in the minds of lawmakers, who are wary of slapping sanctions on gas-exporting countries that offer an alternative to Russian gas.

Parliament wants strict reporting standards limited to the framework of the OGM 2.0 partnership – the UN’s flagship methane tracker, which counts many European companies among its members.

The industry demands this requirement be loosened, a stance similar to the one adopted by countries represented in the Council of the EU. 

On crackdown aspects, both Council and Parliament agree that methane leakage thresholds should be based on previously tracked data. 

But when the provisions should come into force is still a matter for debate. Oil and gas contracts are often agreed for decades, such as those passed by Austrian companies, which are contractually obliged to receive gas deliveries from Russia until 2040.

Parliament wants the standards imposed on all oil and gas exported into the bloc from 2027. EU countries are eyeing the early 2030s – for contracts agreed after the law’s entry into force, a stance similar to the demands of IOGP.

Spain, which currently holds the EU’s rotating Council presidency, tabled a compromise amendment to avoid watering down the law entirely.

In the document, seen by Euractiv, Madrid urged EU countries to give in on timing and add a special provision allowing the EU to block fossil fuel imports during “super emitting events” like pipeline explosions.

“The Presidency would welcome Coreper’s guidance on any flexibilities in this respect or any alternative solutions for a compromise with the Parliament,” the document said.

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[Edited by Frédéric Simon/Zoran Radosavljevic]

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