Methane emissions regulation complicates long-term LNG import contracts to the EU

European importers of liquefied natural gas (LNG) and US exporters of the commodity agree that the need to comply with the EU methane emissions regulation is preventing the conclusion of long-term contracts. Following the Corporate Sustainability Due Diligence Directive, this is another EU regulation that has become the target of criticism from the US and Qatar. The foreign news outlet Argus reported this.

From 2028, the regulation requires importers of gas, oil and coal into the EU to provide information on methane emissions associated with the fuel supplied. According to Swiss LNG trader Axpo, which is at an advanced stage of negotiations on long-term LNG supply contracts with US suppliers, the new requirement poses an obstacle to concluding these contracts.

Domenico de Luca, Axpo's head of trading, told Argus that entering into such large contracts without certainty that LNG suppliers will be able to meet the conditions set out in the methane emissions regulation represents too great a risk for the company.

The world's largest LNG exporters, the United States and Qatar, are therefore pushing the EU to ease the methane regulation, according to de Luca.

"We are in a difficult situation because Europe does not have many options if it does not want to return to LNG supplies from Russia," de Luca added.

Axpo is not the only company having difficulty concluding long-term contracts with US LNG exporters. According to Charlie Riedl, executive director of US lobbying group Center for LNG, US companies seeking to reach final investment decisions are particularly affected.

"The high fragmentation of the domestic gas supply chain does not allow US exporters to trace methane emissions for specific molecules of gas that are liquefied and shipped to Europe," Riedl said, adding that dialogue on the matter is under way between Brussels and senior Washington officials.

The sustainability directive is also a thorn in the side of the US and Qatar

The methane emissions regulation is not the only EU legislation troubling LNG suppliers from the United States and Qatar. In a joint letter sent to EU representatives last week, the two countries voiced opposition to the Corporate Sustainability Due Diligence Directive (CSDDD) and warned of its unintended effects on competitiveness in LNG trading.

The letter, signed by Qatari Energy Minister Saad Kaabi and his US counterpart Chris Wright, states that the directive poses a significant risk to the availability and reliability of important energy supplies for households and businesses across Europe, as well as an existential threat to the future growth, competitiveness and resilience of the European Union's industrial economy.

The CSDDD requires large companies operating in the EU to check that their supply chains do not use forced labour or harm the environment. They face fines for failing to meet these obligations.

The EU is seeking to partially replace gas supplies from Russia with liquefied gas from Qatar and the US. In 2024, LNG accounted for 37 % of total EU natural gas imports. Supplies from the US and Qatar accounted for almost 60 % of total LNG deliveries to the EU.