Repsol warns 90% of crude supplies may not meet EU methane rules

Investing.com -- Repsol SA said Thursday that approximately 90% of its crude oil supplies are expected to fall short of new European Union methane requirements set to begin in January. The Spanish energy company's Deputy Chief Executive Officer Luis Cabra said the firm continues to sign crude supply contracts even when suppliers refuse to provide information required under the regulation.

The company has confirmed methane compliance from January for only about 10% to 15% of its crude supplies. Repsol is signing contracts without compliance provisions because declining to do so would leave its refineries without sufficient crude, Cabra said in an interview.

"Yes, I'm doing that," Cabra said. "I need to do that. Otherwise, I will shut down the refinery on the first of January, 2027."

Starting Jan. 1, importers must show that crude oil, natural gas and coal brought into the bloc were produced under monitoring, reporting and verification standards aimed at reducing methane emissions. Methane is a greenhouse gas that traps about 80 times more heat than carbon dioxide over its first 20 years in the atmosphere.

French President Emmanuel Macron this month wrote to European Commission President Ursula von der Leyen suggesting a possible one-year postponement of the requirements. More than a dozen EU member states have also requested a delay.

The European Commission in July recommended that member states avoid imposing financial penalties for breaching the regulation for three years to protect security of supply. The underlying requirements remain in place, leaving companies concerned they could still face legal challenges, Cabra said.

"Not being imposed penalties still means that you are being un-compliant," he said. "Someone will go to court and say, 'these guys are importing crude oils which are not compliant with an existing regulation'."

Repsol has written to authorities reserving its legal rights in case it faces action over non-compliance, Cabra said. The company would be prepared to challenge regulators if taken to court over requirements it argues are impossible to meet.

The difficulty stems partly from crude suppliers' reluctance to change their standard contracts. Some sellers will not add clauses committing them to providing the methane information Repsol needs to comply with EU rules, Cabra said.

The company's five Spanish refineries are configured to process volumes of heavier crude including grades from the Americas, such as Venezuela. Switching to lighter grades would hurt margins and in some cases would not be suitable for its plants.

The bloc's energy ministers are scheduled to meet informally in Dublin next week, with energy affordability and security among the subjects for discussion.

Original Article

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