Methane Emissions

As part of its effort to abate methane emissions into the atmosphere, the second most impactful greenhouse gas, right after carbon dioxide, the European Commission published in 2020 the EU Methane Strategy. The key pillar of the strategy, the EU Methane Regulation (Regulation (EU) 2024/1787), aims to minimise methane leaks of fossil energy companies operating in the EU and reduce emissions across the Union’s global fossil supply chain.

Entered into force on 4 August 2024, the Regulation lays down rules for the accurate measurement, quantification, monitoring, reporting and verification of methane emissions in the Union’s oil, gas and coal upstream sectors, as well as for their reduction, including through leak detection and repair surveys, repair obligations, and restrictions on venting and flaring.

It also applies increasingly strict requirements for crude oil, natural gas and coal imported in the EU, imposing penalties on importers placing non-compliant products on the Union market.

FuelsEurope fully supports the environmental ambition of the Regulation, and its Members have already committed to abating methane emissions along the value chain, with some having joined the Oil and Gas Methane Partnership (OGMP) 2.0, the global initiative acting as the gold standard for methane emissions reporting in the oil and gas industry.

Nevertheless, the Regulation, as it entered into force in 2024, provides neither the necessary compliance pathways for importer requirements nor sufficient time for refineries to adapt their crude supply and contracting arrangements.

Most of the crude oil consumed by EU refineries is imported from extra-European countries through complex supply chains, making it difficult to obtain the producer-level data required by the Regulation and limiting incentives for producers to improve their methane performance to European standards.

In order to substantiate the concerns raised by the industry, Concawe, together with IOGP Europe, commissioned WoodMackenzie to conduct a study on the impact of the Regulation’s importer requirements on crude and gas availability, on prices and on the refining sector. The study focuses on the implementation of Article 28, according to which, from 2027, importers must demonstrate that imported products are subject to monitoring, reporting and verification measures equivalent to those set out in the regulation. The WoodMackenzie study concludes that, based on 2024 EU import patterns, the EU risks 87% of its crude oil supply becoming non-compliant.

While the Regulation does not introduce any formal ban on non-compliant products, the absence of sufficient compliance solutions, combined with the risk of penalties up to 20% of the annual turnover in the preceding business year, will deter importers from placing non-compliant crude in the EU market, with severe consequences on the European security of supply.

The study also finds that EU refinery throughput could fall by around 50% (approximately 4.6 mb/d) between 2027 and 2030 due to insufficient compliant crude availability. This would represent a capacity reduction equivalent to the closure of around 40 EU refineries.

Separately from the impacts on importers and the EU industry, the overall environmental objectives of the regulation could be put in jeopardy due to carbon leakage. Europe could become structurally a more import-dependent region, with fuel import costs increasing by more than $17 billion annually, and gasoline (+24%) and diesel (+16%) prices rising significantly. 

FuelsEurope, in line with several other industry stakeholders, stresses the urgent need for:

  • Harmonised implementation across Member States to prevent fragmented national reporting guidelines and market distortions.
  • Concrete and practical guidance from the European Commission, which Member States can formalise at the national level, in order to provide the necessary legal certainty.
  • Structured and ongoing engagement by the European Commission and Member State competent authorities with industry.
  • Timely delivery of guidance, aligned with the implementation of the EU Methane Regulation and real-world contracting timelines, recognising that supply decisions are being taken now.
  • Introduction of a “Stop the clock” provision, and necessary legislative adjustments to allow an effective implementation.

FuelsEurope will continue to engage with institutions and industry to develop workable solutions and raise awareness on the potential impacts of the Regulation on the refining sector.