LNG in World Markets: LNG Industry Wary of EU Methane Regulation

This current feature was extracted from the latest edition of Poten’s LNG in World Markets, a monthly service published on October 31, 2024. The new EU Methane Regulation will compel importers of LNG into Europe to negotiate new clauses in their supply contracts, including from the US, their main supplier, to comply with increasingly tough reporting standards on methane emissions. Failure to meet the far-reaching terms of the new law, the world’s first methane requirement for imported fuels, may result in financial penalties if rules that are uncertain and difficult to implement are not met. Regulation (EU) 2024/1787 came into legal effect on Aug. 4 and is the most significant display of the EU’s determination to cut methane emissions. It even extends the EU’s regulatory influence to LNG suppliers outside the 27-nation bloc whose leading LNG importers include Spain, France and the Netherlands. The regulation is part of the European Commission’s policy aimed at reducing greenhouse gas emissions. But the complex legislation and industry uncertainty over compliance requirements is already adversely impacting long-term contract negotiations. One problem facing parties in these negotiations is how obligations and penalties should be assigned.

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