Tsvetana Paraskova
Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.
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By Tsvetana Paraskova – Nov 14, 2024, 6:00 PM CST
- Starting in 2030, the EU will require imported fossil fuels, including LNG, to meet stringent methane emission standards.
- The Biden Administration has initiated talks with the EU to secure equivalency for U.S. methane regulation.
- The U.S. accounted for 66% of LNG exports to Europe in 2023.
The United States is looking to keep its LNG flowing to Europe in the long term when the EU will have standards for methane emissions for all imported fossil fuels.
The EU’s methane regulation will require imports of oil and gas, including LNG, to have equally strong or more stringent requirements of thresholds for these emissions than the European Union, starting in 2030.
These requirements, yet to be deliberated and announced in detail, would mean that U.S. LNG developers and exporters would need to clean up their operations to ensure their product would be EU-emission compliant by the end of the decade.
U.S. Seeks Methane Regulation Alignment
Days before the U.S. presidential election, the Biden Administration sought to begin discussions with the EU to ensure that LNG supply compliant with U.S. methane rules would automatically be considered compliant with the EU regulation. The Department of Energy (DOE) and the Environmental Protection Agency (EPA) co-signed a letter addressed to European Commission Director-General for Energy Juul Jorgensen, requesting a determination of “equivalency” for U.S. exports of LNG to Europe.
The letter was signed by DOE Assistant Secretary for Fossil Energy and Carbon Management, Brad Crabtree, and the Environmental Protection Agency’s (EPA) Assistant Administrator for the Office of Air & Radiation, Joseph Goffman.
“We understand that this process will take time. However, we would like to begin discussions as soon as possible, to ensure the continued reliable and stable supply of natural gas from the United States to Europe,” they wrote in the letter dated October 28.
Related: US LNG Exports Poised to Hit 9-Month High
“We are confident that the United States’ extensive domestic regulatory regime to monitor, measure, and reduce greenhouse gas emissions (especially methane) from the oil and gas sector is consistent with the goals of the EU’s regulations,” they noted.
With an alignment of methane emission standards, the U.S. is looking to keep its now largest LNG export market well into the next decade. It is also seeking to have methane regulation on U.S. LNG regardless of what President-elect Donald Trump would do with U.S. environmental protection requirements over the next four years—most likely repeal most of them.
U.S. LNG Exports to Europe
The United States, the world’s top LNG exporter last year ahead of Qatar and Australia, continued to export two-thirds of its LNG volumes to Europe, including Turkey, in 2023, according to data from the U.S. Energy Information Administration (EIA).
Similar to 2022, Europe and Turkey remained the primary destination for U.S. LNG exports in 2023, accounting for 66% of U.S. exports. Asia, the top destination of America’s LNG before the Russian invasion of Ukraine in early 2022, now trails Europe with about a quarter of U.S. LNG going there.
Moreover, the U.S. remained the largest LNG supplier to the EU and the UK in 2023, accounting for nearly half, 48%, of total LNG imports. Qatar and Russia remained the second- and third-largest LNG suppliers to Europe last year, with market shares of 14% and 13%, respectively.
As the EU seeks to ditch Russian gas, it could consider replacing imports of Russian LNG with U.S. LNG, European Commission President Ursula von der Leyen suggested last week.
“We still get a lot of LNG from Russia and why not replace it by American LNG, which is cheaper for us and brings down our energy prices,” von der Leyen told reporters.
LNG Supply with the Methane Regulation
The EU methane regulation has yet to determine how and when methane rules in a country outside the bloc would be considered “equivalent or stronger” to the methane emissions legislation in the European Union.
In view of this regulation, a lot is at stake for both the United States and Europe in terms of LNG supply in the medium and long term.
Europe needs U.S. LNG as it severs ties with Russian gas, while the EU, the UK, and Turkey combined is the top export market of U.S. LNG producers and developers.
U.S. trade groups, including the American Petroleum Institute (API) and the U.S. Chamber of Commerce, have expressed concerns that the EU regulation could undermine the EU’s energy security by depriving the bloc from U.S. LNG supply if it is found to be more polluting than the EU requirements.
President-elect Trump will likely target for immediate repeal or rollback the methane emissions fees finalized by the Biden Administration, while also lifting the current pause on new LNG project permitting.
However, regardless of any U.S. rollbacks on methane fees and emissions requirements, and a possible boost to LNG export developments under Trump, America’s exporters will be closely watched for emissions reporting and emission profiles over the next few years.
The EU hasn’t decided how exactly these methane regulations would actually work. It may have to juggle between its energy security and climate goals in finalizing the methane requirements for fossil fuel imports.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana Paraskova
Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.
