EU methane rules will impact US oil and gas producers

The European Union’s methane rules are about to go into full force, prompting oil, gas and coal companies to monitor, measure and report their emissions. The same restrictions will also apply to energy imports. This affects the United States, the EU’s largest supplier of liquefied natural gas.

EU regulators could restrict access to European markets if the country fails to comply. This is significant as the continent weans itself from Russian oil and gas and opens itself up to global imports. But producers who rise to the challenge could gain a competitive advantage. By contributing to cleaner air, they could attract more investment, leading to advances in leak detection and methane capture technology.

“Methane is the second largest cause of global warming and air pollution after CO2 and is responsible for around one third of greenhouse gas emissions, harming both our environment and our health,” European Commission Energy Commissioner Kadri Simson said in a statement. “With the final adoption by the EU of the Methane Regulation, we now have the means to gain better insight into the main sources of methane emissions in the energy sector. This will increase transparency and provide the tools needed to reduce these potential emissions, both in the EU and globally.”

The new regulations require gas, oil and coal operators in the EU to:

• Stop routine combustion and limit venting: Only allowed in emergency situations, in case of technical failure or for safety reasons.
• Implementing advanced monitoring: Using satellites and other technologies to detect and report methane leaks.
• Adopting best practices: Although the EU must still set “maximum methane emission intensity values”.

While the standard does not specify the exact number by which manufacturers must reduce their emissions, earlier versions of the rule aimed to reduce methane levels by 35% by 2030 compared to 2005. This target is in line with the EU’s broader climate neutrality goal by 2050

Oil and gas account for a fifth of all human-related global methane emissions, according to BP. Methane levels have risen 0.8% since 2022. The challenge: Natural gas, which causes about half the emissions of coal, is now the most widely used fuel for generating electricity in the United States.

“According to the Global Methane Reduction and Flaring Partnership, if we can fully exploit the potential for methane reduction, the world could avoid about 0.1°C of warming by mid-century. To put that in context, that’s roughly equivalent to turning off emissions from all the world’s cars and trucks,” BP’s Fuzzy Bitar said in a speech.

Millions in investments

Major oil and gas producers are already investing in mitigation efforts to limit methane emissions. In addition, companies like Shell, Equinor, BP, Total, Statoil and EQT are thinking long-term: without methane control, the world cannot limit rising temperatures, which undermines the prospects for natural gas; methane is a byproduct of the fuel that has economic value if recovered.

For example, BP has been measuring and reporting methane levels for about four years. The goal is to reduce methane intensity by 50% in the coming years. It will achieve this by implementing new technologies and employing more people in the field. “We’re doing everything from implementing drone-mounted measurements to advanced predictive algorithms to implementing exciting new flow measurement technologies,” Bitar said.

The EU and the US launched the Global Methane Pledge at the UN COP26 climate conference in Glasgow in 2021. The International Energy Agency estimates that the industry could reduce emissions globally by 75%.

How much methane is lost during operations? About 75 million metric tons. Some of the gas is also flared because it can’t reach production plants. But capturing and selling the methane could offset the costs of new technologies.

San Francisco-based Paxon Energy recovers about 20 million standard cubic feet of methane annually during pipeline maintenance, which utilities can then sell. “We recover 95% to 99% of the natural gas that would otherwise be burned or released into the atmosphere,” says CEO Nooshin Behroyan.

The United States aims to reduce methane emissions by 30% by 2030, which will give it an advantage over new EU regulations. Nevertheless, the standards will put pressure on oil and gas producers around the world. Smaller producers with less capital may need help, but those companies that adapt will gain market share and increase their access to capital, driving sustainability and innovation in the industry.