Methane Regulation as a Factor of Competitiveness in the LNG Market

The article analyzes changes happening in the global liquefied natural gas (LNG) market, which are associated with the announced tightening regulation by the European Union of LNG imports until 2030 based on environmental criteria. The authors argue that a marked increase in the significance of LNG in global trade in fuel and energy resources, and the large-scale expansion of liquefied natural gas into the European market in 2022–2024 in particular, indirectly accelerated the adoption of stricter regulation of gas imports by the European Union. New initiatives of the EU regulators for methane emissions combined with the full enforcement of the carbon boarder adjustment mechanisms by 2030 will actually form a comprehensive scheme for filtering and additional taxation of imports of fuel and energy resources into the European market. New regulatory requirements pose the greatest risks for LNG exporters, since innovations establish a fundamentally new competition paradigm for liquefied gas producers, including not only traditional cost parameters and contract terms, but also methane intensity / carbon intensity indicators. There are no internationally recognized methods and standards for assessing the methane intensity of natural gas production and LNG production to date; the necessary statistical data on the intensity of methane emissions at the level of individual LNG production facilities is not available. In this situation, American LNG producers, in order to proactively prepare for meeting the requirements of European regulators, began to develop their own initiatives to monitor methane intensity and reduce methane emissions. There exists a probability that regulatory mechanisms similar in content to the regulatory innovations of the European Union can be introduced in other large LNG markets, in particular in Northeast Asia. Hence, it is advisable for Russian LNG producers and exporters to begin preparing for protecting their competitive positions, taking into account the parameters of methane intensity / carbon intensity of gas production and transportation.