Spain’s Repsol SA says about 90% of its crude oil supplies are unlikely to comply with the European Union’s new methane emissions requirements. Under the rules, importers must verify that crude oil, natural gas and coal brought into the EU were produced in line with prescribed standards for methane emissions monitoring, reporting and verification.
According to deputy chief executive Luis Cabra, Repsol has so far been able to confirm compliance for only 10–15% of its crude oil supplies. He said the company is still signing supply contracts even when sellers refuse to provide the information required by the EU regulation or to include compliance clauses in agreements.
Cabra said the company is acting out of operational necessity. Without such contracts, Repsol’s refineries could be left short of feedstock. “Yes, I do that. I have to do that. Otherwise, I would have to stop the refinery,” he said.
Repsol argues the issue goes beyond fines. Although the European Commission has advised member states to refrain for three years from imposing financial penalties for breaches of the regulation in order to protect energy security, the core requirements remain in force. The company is concerned that it could still face legal challenges.
Cabra said the absence of fines does not mean imports are compliant. In his view, a third party could still go to court and argue that companies are importing oil that does not meet the regulation now in effect. Repsol has therefore sent a letter to the relevant authorities reserving its legal rights in case it is held liable, and says it is prepared to challenge regulators in court if punished for requirements it believes are not practicably achievable.
One reason for the impasse, the company says, is that oil suppliers are reluctant to amend standard contracts. Some sellers refuse to add provisions that would oblige them to give Repsol the methane emissions data it needs.
The issue also matters because of Repsol’s industrial setup. The company’s five Spanish refineries are designed to process heavier crude grades, including barrels supplied from countries in the Americas such as Venezuela. Switching to lighter grades would hurt profit margins and, in some cases, could be incompatible with existing processing capacity.
Debate over the timetable for the EU rules is continuing. French President Emmanuel Macron has proposed to European Commission President Ursula von der Leyen that implementation be delayed by up to one year, and more than a dozen EU member states have also called for an extension. EU energy ministers are expected to discuss energy availability and energy security in Dublin.
