Decoding the EU Methane Regulation for the Energy Sector

Almost two years after the European Commission’s initial proposal, on November 15, 2023, the European Union reached a provisional agreement on a first-ever EU Regulation on methane emissions reduction in the energy sector. A step in the right direction, the deal aims to halt the avoidable release of methane into the atmosphere and introduces methane emission limits on fossil fuel imports. Since then, the EU’s legislators have passed the legislation and it is now awaiting publication in the EU Official Journal in the next few weeks and will enter into force 20 days later.

At a recent Methane Mitigation Europe Summit, we sat down with Henry Winckle, International Relations Officer at DG ENER, European Commission, for exclusive insights on the new EU regulation and what it means for operators in Europe and abroad. Henry has an extensive background in methane emissions abatement, primarily in the oil and gas sector, and in this interview he shares his expert opinion on decarbonization strategies, along with the metrics or benchmarks operators should focus on to track progress towards climate goals.

Recorded 14 February 2024

Maryam Irfan, Industrial Decarbonization Network: Can you talk to us about the new EU regulation and where that sits within the global climate agenda?

Henry Winckle: What we at the EU Commission have tried to do is focus on both the internal and external paths of methane emissions within our regulations. On the domestic side, it includes ambitious requirements for measurement, reporting, verification, and leak detection. Within the European Union, encompassing oil, coal, and gas, there are specific requirements for Member States to map and address older legacy infrastructure such as flooded coal mines and oil fields, for example. However, methane emissions from oil and gas production within the European Union only account for about 8% of global energy emissions. It’s why we've included an external dimension to address imports of oil, gas, and coal, which account for approximately 30% of global energy emissions.

There are two main aspects to this external dimension. Firstly, we're focusing on super emitters and super emitting events, supporting initiatives like the Methane Alert and Response System (MARS) managed by the International Methane Emissions Observatory. Our regulation mandates further development of these kind of tools to also include coal and potentially other sectors beyond energy, facilitating stronger bilateral diplomatic engagement where necessary.

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The primary focus of the external part of the regulation is on data and import requirements. Currently, the challenge lies in the lack of comprehensive data. Therefore, starting from the end of this year (2024), all importers will be required to report information on methane intensity and standards used, such as the Oil & Gas Methane Partnership 2.0 (OGMP 2.0) in the production of oil, gas, and coal, along with other relevant qualitative and quantitative data. While we acknowledge that initial data quality may vary, this establishes a baseline for future action.

By late 2025, we plan to establish a methane transparency database, publishing data by country, producer, and possibly basin. This will be followed by the inclusion of methane intensity in the database by mid to late 2026. By January 1, 2027, all importers into the European Union will be required to demonstrate compliance with equivalent measurement, reporting, and verification standards as those within the EU. Non-compliant importers will face penalties, with provisions for older contracts, but a requirement for compliance upon renewal or signing of new contracts.

Moving forward, we'll review the legislation to assess its effectiveness and potentially implement additional requirements, such as companies reporting their own methane intensity profiles. By late 2030, we will then implement a methane performance standard for all oil, gas, and coal importers within the EU, with specifics outlined in subsequent delegated acts.

Maryam Irfan, Industrial Decarbonization Network: How can the industry effectively navigate and translate climate agreements into tangible and actionable strategies?

Henry Winckle: Regarding the transition away from fossil fuels, it's evident that the writing has been on the wall for some time. EU oil and gas consumption peaked just before the energy crisis, and the International Energy Agency predicts that global oil, gas, and coal consumption will all peak well before the end of this decade. As there's more availability on the market and consumers have more choices, we hope that other importers will also consider transitioning to lower methane fuels. Countries or companies slow to adapt may be left behind, which could have negative consequences, particularly in regions like North Africa.

We've already witnessed the initial steps in this direction. For instance, China's development of a new methane plan, primarily focused on domestic waste production, presents intriguing possibilities for energy.

Maryam Irfan, Industrial Decarbonization Network: When formulating decarbonization strategies, what should the industry be prioritizing?

Henry Winckle: There are numerous decarbonization and transition pathways, and some, as exemplified by Ørsted, formerly a major oil and gas company transitioning to predominantly renewables, may entail complete departure from the oil and gas industry altogether. Others involve significant reductions in methane emissions, potentially incorporating carbon capture and storage, or other forms of industrial carbon management, but so long as these decarbonization strategies are holistic, effectively reaching their goals relatively swiftly, they are all valid.

During a session I attended at the Methane Mitigation Europe Summit, the speaker articulated this eloquently: ‘Don't wait for the regulator to tell you what to do because that will be too late.’

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Maryam Irfan, Industrial Decarbonization Network: How do you see government policies evolving to support the energy transition post COP28, and what role can the oil and gas industry expect to play in these policy frameworks?

Henry Winckle: This ties back to what we observed at COP28, not just the transition away from fossil fuels but also initiatives like the Oil and Gas Decarbonization Charter, and other related efforts by the Oil and Gas Climate Initiative and others in the space. What we're seeing is that many large international oil and gas companies (IOCs) are relatively effective in addressing methane emissions, particularly for their own operated assets. The situation may differ for joint ventures, and national oil companies (NOCs), often burdened with significant debt, as they require assistance in this area. This is where initiatives like the Oil and Gas Decarbonization Charter come into play.

Additionally, the engagement of major international oil companies in initiatives like the World Bank’s Global Flaring and Methane Reduction Partnership (GFMR) is quite interesting. It's intriguing to observe their involvement, especially in regions where oil and gas companies have the opportunity to shape necessary policies by addressing market failures themselves.

Maryam Irfan, Industrial Decarbonization Network: Are there specific policy measures or incentives that could facilitate a smoother transition for the industry?

Henry Winckle: Currently, we're collaborating with the United States and several other countries on the Greenhouse Gas Measurement, Monitoring, Reporting, and Verification (MMRV) Framework Working Group, which encompasses more than just methane, addressing general greenhouse gas emissions as well. The aim is to ensure that the necessary data for initiatives like these are readily available within regulatory frameworks. Additionally, initiatives like the Japanese Coalition for LNG Emission Abatement towards Net-zero (CLEAN) are essential, particularly in complex and interconnected markets such as the United States. While it's not a certification framework, it's designed to ensure that everyone, including stakeholders in such markets, understand the origins of oil and gas associated greenhouse gas emissions and it’s all achieved through a verified, verifiable, and transparent process.

Maryam Irfan, Industrial Decarbonization Network: What specific metrics or benchmarks should operators focus on to track progress towards climate goals?

Henry Winckle: It's no secret that the European Commission holds the OGMP 2.0 in high regard, along with the extensive work of the International Methane Emissions Observatory. We utilize these as benchmarks to gauge whether a company, producer, or jurisdiction is genuinely committed to measuring and reducing methane emissions. It's essential to remember that the OGMP 2.0 encompasses not only a commitment to measuring but also to reducing absolute methane emissions.

However, decarbonization efforts for gas companies extend beyond methane reduction. Strategies such as electrification and on-site utilization play crucial roles and may be measured and certified differently across various jurisdictions, necessitating diverse frameworks.

Learn more about how to prepare for and effectively navigate methane regulation at our upcoming events:

Methane Mitigation Canada Summit
Calgary, September 30 - October 2, 2024

Methane Mitigation America Summit
Houston, December 3-5, 2024

Methane Mitigation Europe Summit
Amsterdam, February 24-27, 2025