The US and Qatar warn the EU: An energy crisis is coming due to the methane regulation – Price hikes and the risk of natural gas shortages are on the table
The European Union is facing new warnings from two of the world's largest suppliers of liquefied natural gas (LNG). The United States and Qatar estimate that the implementation of the European regulation on methane emissions could lead to serious disruptions in the natural gas market, a restriction of supplies, and a significant increase in prices. The message comes just hours before the meeting of the European Union energy ministers, who are called upon to evaluate the course of European energy policy.
US and Qatar: "Compliance is practically impossible"
In a joint letter to European authorities, US Secretary of Energy Chris Wright and Qatar's Minister of Energy Saad al-Kaabi argue that the requirements of the new regulation cannot be implemented in practice. As they state, "there is no realistic way to comply with the regulation," warning that both exporters and importers cannot enter into contracts that may violate European law. The two ministers estimate that the market impact will be inevitable, with a restriction of available LNG quantities and significant price hikes. The letter is also co-signed by two other key natural gas suppliers to Europe, Algeria and Nigeria.
What the European regulation provides for
The regulation on methane was approved by the European Union two years ago with the aim of reducing emissions of this specific gas, which is the main component of natural gas and is considered a powerful greenhouse gas. The legislation is not limited only to European companies but now extends to all energy suppliers that export natural gas to the European Union. From 2026, LNG producers are required to monitor and record methane emissions throughout the production chain, from the field to the liquefaction facilities and then during the transport of the cargo, while at the same time, they must prove that they are taking measures to limit emissions, or else they will face financial penalties.
Qatar had warned since last year
Qatar's reaction to the regulation is not new. Doha had already made it clear since last year that if the European Union insists on implementing the regulation, it could even stop LNG exports to the European market. The stance of the United States was similar. Chris Wright had characterized the regulation as "a critical non-tariff barrier to trade," arguing that it imposes a disproportionate burden on American exporters and on US-EU trade relations.
The retreat of Brussels did not satisfy the suppliers
Faced with the reactions of the major LNG exporters, the European Commission decided to postpone the imposition of financial penalties until 2030. However, even this concession does not seem to satisfy the major natural gas producers, who are essentially asking for the abolition of the regulation, arguing that even its future implementation creates uncertainty for investments and long-term supply contracts. At the same time, several European Union member states are also expressing reservations, as they consider it almost certain that the cost of "low-methane" LNG will ultimately be passed on to European consumers.
Why the US believes the regulation cannot be implemented
The main objection of the American authorities concerns the way the natural gas market operates in the United States. Production is carried out by hundreds of different companies, which channel natural gas into a vast and highly complex network of pipelines that ends up at liquefaction units on the shores of the Gulf of Mexico. In practice, as Washington argues, it is technically impossible to monitor the path of every quantity of natural gas from the point of extraction to the LNG tanker in order to certify that it meets the requirements of European legislation.
The opposing view of environmental organizations
The energy consulting firm Rystad Energy presents a different picture. In a study prepared on behalf of the environmental organization Environmental Defense Fund, it is argued that the global market has nearly three times the amount of natural gas that complies with European requirements compared to the total imports of the European Union. However, this argument is challenged by several analysts, who point out that if there were indeed such high sufficiency, it is unlikely that the two largest LNG exporters in the world, the United States and Qatar, would argue that compliance is practically unattainable.
Europe is increasingly dependent on American LNG
The timing is causing particular concern in Brussels. According to data cited by Bloomberg analyst Javier Blas, approximately 59% of the European Union's LNG imports now come from the United States, while in April this percentage rose to as high as 64%. This development has caused concern within the European Commission, as the Union's energy security now depends to a large extent on a single supplier. In this context, any new tension in relations with Washington could prove particularly costly for the European energy market.
The real goal of the regulation
According to critics of the measure, the main goal of the regulation is not exclusively to reduce methane emissions. As they argue, the real aim is to limit the total consumption of natural gas in Europe by making its supply more expensive and difficult. The organizations that support this policy believe that reducing natural gas consumption will strengthen the energy security of the European Union in the long term. On the other hand, European industry expresses strong objections, warning that higher energy costs will further damage the competitiveness of businesses. Which of the two approaches will prevail is expected to be seen in the coming period, as pressures on Brussels intensify and major natural gas suppliers escalate their warnings about the consequences of European policy.
www.bankingnews.gr
Readers’ Comments