EU Methane Regulation: Addressing the tracing issue to improve compliance

Industry calls for a pragmatic solution to the tracing challenge in the EU Methane Regulation.

IOGP Europe, together with five other industry associations, released a joint paper highlighting a key implementation challenge in the EU Methane Regulation. Download the paper below and discover its executive summary.

Executive summary
In 2024, the EU imported 90% of its natural gas demand in the form of LNG and pipeline gas1 and 96% of its crude oil consumption in 2023. This significant dependency on supplies from non-EU countries illustrates the potential impact that obligations for EU importers of these products contained in the EU Methane Regulation (EUMR) may have. As mentioned in our recently published “Action Plan to address key challenges on importers’ requirements in the Methane Regulation”4, if no effective and pragmatic solutions become available in a timely manner, then the various challenges set by the EUMR are likely to exacerbate serious risks for the liquidity and security of gas and crude supplies to the EU and their affordability for EU consumers, ultimately affecting EU competitiveness.

Both Industry and Competent Authorities in EU Member States need clarity on ways to comply with the importer obligations of the EUMR and solutions to do so. However, even if a third country producer fulfils all requirements set by the EUMR, EU importers and in fact most suppliers of gas and crude rarely have direct relationships with a producer since crude and gas/LNG today are mostly supplied in commingled form via global supply chains and bought and sold in trading hubs. Obtaining the required information related to the physical origin of the supplies is therefore a significant challenge (the “tracing issue”).

While a few general concepts/schemes to solve this issue have been developed, they may not adequately consider the current gas and crude market structures and, hence, are unlikely to be implementable without considerable cost and disruption to existing markets or are unlikely to be implementable in key producing countries that supply the EU market.

In response and as indicated in the “Action Plan”, the industry representatives supporting this paper would like to share their views on the key principles that any efficient and market-reflective solution to the so-called “tracing issue” should embody. Ultimately, industry requires competent authorities and/or Member States to formally recognise solutions/schemes that provide importers with legal certainty to use paths to comply with EUMR in what we call in this paper “complex value chains”. This should also facilitate a broader discussion with stakeholders, incl. the European Commission and EU Member States to identify accepted ways for importers to achieve compliance with EUMR.

However, certification alone cannot resolve the broader structural and operational challenges posed by the EUMR. While certification schemes may help demonstrate compliance, they do not address the underlying issues of technical feasibility, legal uncertainty, and disproportionate administrative burden that continue to hinder effective implementation of MER. It is therefore important to introduce limited and well-defined adjustments to the primary legislation through an Energy Omnibus.