EU: What are the new monitoring, reporting and verification obligations for the oil, coal and gas sectors?

INSIGHT by the European Commission

| What are the new monitoring, reporting and verification obligations for the oil, coal and gas sectors? 

Under the new EU methane regulation for the energy sector, oil, gas and coal companies across the supply chain will have to properly measure, monitor, report and verify their methane emissions according to the highest monitoring standards, and act to reduce them. In particular, the regulation requires companies to quantify methane emissions at source level (such as wells) for oil, gas and coal and at site level for oil and gas. Operators are required to submit each year a methane emissions reports, assessed by an independent, third-party verifier, to the national competent authorities in the EU Member States where their assets are located.

To tackle the insufficient information on how many inactive oil or gas wells or inactive coal mines are present in the EU, the Regulation also tasks Member States to draw up an inventory of closed, inactive, plugged and abandoned assets under their responsibility, or on their territory, to monitor their emissions and to adopt and carry out a plan to mitigate such emissions as soon as possible.

| How does the regulation tackle emissions from venting and flaring? 

The regulation bans routine venting and flaring by the fossil fuel sector. In particular, it requires EU gas, oil or coal operators to stop avoidable and routine flaring and to reduce flaring and venting to unavoidable situations such as emergencies, technical malfunctions or when it is necessary for safety reasons. In addition, it favours the re-use or recovery of gas over flaring, and flaring over venting. It will be up to the designated national authorities to ensure compliance with the overall regulation, including these provisions. 

| How will companies be required to detect and repair leaks?

The regulation requires EU gas and oil operators to take all possible measures to prevent or minimise methane emissions. They will have to regularly carry out surveys of their gas and oil installations to check for methane leaks and to repair them as soon as possible. The survey frequencies will vary according to the type of installations and, in the case of pipelines, the type of material they are made of. Companies are also required to submit to the responsible authorities their leakage detection and repair (LDAR) programmes, including detailed surveys and planned actions. More specifically, they are to carry out surveys on methane-emitting components and use detection devices in line with specific minimum detection limits and latest detection techniques to be set by the Commission at a later stage in secondary legislation.

Once detected, companies are to repair or replace components that are leaking beyond specific levels and continue to monitor them after the repairs. Such levels vary according to whether components are above or under the ground or sea.

| How will the regulation improve transparency on methane emissions from fossil fuels on international markets? 

The majority of methane emissions linked to fossil energy consumed within the EU occur outside the EU. The regulation will improve the availability of information and increase transparency. This should incentivise the reduction of methane emissions in exporting countries, as importers will be able to seek the least environmentally harmful imports to offer to their customers.

Under the regulation, the Commission will establish and maintain a methane transparency platform setting out profiles of Member States, producers and importers that place crude oil, natural gas or coal on the EU market. The same applies to non-EU countries and producers who export crude oil, natural gas and coal to the EU. This will allow importers to make informed choices on their energy purchases.

The Commission  will also establish a global methane monitoring tool and set up a methane transparency database that regularly publishes the results of aerial monitoring of large emitters of methane from energy sources, with updates to be provided every month. The data will be sourced by using satellite data providing information on the magnitude, occurrence, and location of high methane-emitting sources within or outside the EU.

At the same time, the EU Member States will be required to collect data and information on methane emissions reported by EU operators and importers and to make it available to the Commission and to the public.

| How will the rapid alert mechanism for super-emitting events work in practice?

In the coming months, the Commission will set up a rapid reaction mechanism in case of so-called “super-emitting” events, namely episodes concerning facilities, equipment or infrastructure emitting very high rates of methane. The mechanism will provide information on the magnitude, recurrence and location of high methane-emitting sources, both within and outside the EU. It will be based on satellite data and input from certified data providers and services, including the EU-backed satellite imaging service, Copernicus. The Commission will regularly update this information and will make it publicly available.

In case the tool identifies a new major emission source, the Commission will be able to alert the relevant country/concerned countries, request information on action to address the leak and discuss ways to remedy the situation.

| How will the regulation incentivise the reduction of methane emissions from imported fossil energy?

As well as regulating the EU crude oil, natural gas and coal industry, the regulation is also the world’s first to regulate methane emissions from imports. Specifically, importers of crude oil, natural gas and coal into the EU will have to report, from 2025 onwards, on annual methane emissions data, including from countries and companies exporting to the EU. Information will have to include whether and how they are measuring, reporting and reducing methane emissions.

As of January 2027, the Regulation further requires that new import contracts for oil, gas and coal can be only concluded if the same monitoring, reporting and verification obligations are applied by exporters as for EU producers. This means that for all contracts concluded with exporters to the EU after the entry into force of the regulation, EU importers will have to:

• • demonstrate (as of January 2027) that the concerned producers are subject to measuring, monitoring, reporting and verifying methane emissions in conformity with the requirements of the EU regulation.
  • report (from 2028) on the methane intensity of the production of oil, gas and coal that they are placing on the EU market, in line with a methodology to be later set out by the Commission in secondary legislation. To ensure a level playing field, EU producers will likewise be subject to this obligation.
  • demonstrate (from 2030) that the methane intensity of the production of oil, gas and coal imported into EU market is below certain maximum values, to be set by the Commission at a later stage in secondary legislation.

To preserve security of supply, failure to meet the requirements of the regulation will not lead to an import ban on oil, gas or coal to the EU market. Instead, a system of penalties, for example, periodic penalty payments or fines will be put in place and enforced by the Member States for infringements of this regulation. Penalties will have to be set by the national authorities in the Member States at levels that are effective, proportionate and dissuasive.

Increasing market transparency on fossil energy imports into the EU will be key to incentivise a wider uptake of methane emissions mitigation solutions around the world, in line with the EU’s objectives to spearhead the green transition globally. 

| What are the next steps?

The regulation will enter into force on the 20th day following its publication in the Official Journal of the EU. Within six months of entry into force, Member States are to appoint the appropriate national authorities to oversee effective compliance with the regulation by EU oil, gas and coal operators, as well as importers and independent verifiers.

The Commission will come forward with the necessary secondary legislation, detailing the obligations on EU operators and competent authorities, as well as on importers of fossil energy.