The correct answer is:
It is lost in the form of heat and sound.
In an engine, the chemical reaction between fuel and oxygen primarily produces useful work. However, not all the energy from this reaction is converted into useful work; a significant amount is lost as waste heat (due to inefficiencies) and sound (due to engine noise). The energy is not destroyed, and it does not remain stored in chemical bonds, nor is it converted into methane in standard combustion processes.