Methane Detection Technology
This Case Study was developed following Frame’s 2023 Pre-Investment Considerations: Diving Deeper into Assessing Future Greenhouse Gas Impact. Frame has since released its updated Project Frame GHG Impact Methodology, with further guidance.
Impact Analysis Summary
|
Incumbent Market |
Oil and gas production |
|
Emissions Reduction Pathways |
Avoidance |
|
Potential Impact Geography |
Global |
|
Potential Impact Market Capture |
100% |
|
Potential Impact in 2050 |
657 MtCO2e |
|
Cumulative Potential Impact 2025-2050 |
5.9 GtCO2e |
|
Planned Impact in 2050 |
3.8 MtCO2e |
|
Cumulative Planned Impact 2025-2050 |
16.9 GtCO2e |
Methane Detection Co (MDC) has developed a new remote sensing technology capable of identifying large and medium methane leaks from oil & gas upstream and midstream infrastructure, using sensors on satellites and aircrafts.
Methane is a potent greenhouse gas (GHG) with a 100-year global warming potential 29.8 times that of CO2. Reducing methane emissions is among the most cost-effective methods to reduce GHG emissions and the IEA estimated that global oil & gas methane emissions were close to 3.6 GtCO2e in 2024.
MDC provides impact “facilitating” technologies and services. While identifying methane leaks does not have an impact in-and-of-itself, MDC then provides the emission source, rate, and location to its customers who are then able to avoid further methane emissions by fixing leaks earlier than they otherwise would have. The detection of methane leaks can also be a significant share of the overall cost of abatement. MDC continues to monitor the site after the initial survey, and if the leak is observed to re-occur, then the recording of impact is ceased for that mitigation at the time of observed reoccurrence.
Our analysis concludes that this technology could have an annual potential impact of 657 MtCO2e in 2050, which assumes 100% market adoption globally.
Challenges
There are a range of uncertainties associated with this methane detection case study. Uncertainties can arise when using assumptions and averages based on historical performance due to limited availability of past data expectations of future changes to those assumptions and averages (this is especially true for early-stage ventures).
There are also uncertainties in the measured emissions rate, driven by operational changes and meteorological conditions, as well as in assumptions of how long the emission would have occurred for in the absence of detection. MDC regularly undertakes calibration tests and takes part in blind studies to improve its accuracy and reduce the range of uncertainty.
MDC must build strong feedback mechanisms to be able to get a good understanding of the customer’s asset characteristics and status quo detection regime in order to build a baseline scenario, and to receive adequate feedback regarding fixed leaks.
In this analysis we have constrained MDC to focus only on the Oil and Gas sector. However, by extending its focus to include other sources of methane emissions including, mining, landfill sites, bio-gas facilities and agriculture, MDC could significantly grow its business activities and impact. These scenarios could be added to the analysis if the company anticipates adding these initiatives to its business plan.
Use of the Study
Constructing a forward-looking GHG impact analysis necessitates several subjective decisions, including determining the necessary granularity of the analysis. The extent of detail in such analyses often depends on available resources; few firms possess the means to routinely conduct highly detailed analyses. Conversely, overly simplistic calculations carry the risk of undermining the analysis value entirely. Therefore, a balanced approach is required.
This case study attempts to offer such a middle-ground approach. The accompanying commentary aims to offer additional context on the methodology used in constructing this analysis.
Note that an analysis may look different based on the goals of the investor using the analysis. An investor may have underwriting criteria that require clearing certain thresholds for potential GHG impact. These criteria may dictate a certain scope of analysis (planned, potential, etc.) and can be used to inform an impact linked compensation plan. Planned impact analysis is used in the due diligence process to help set growth forecasts and impact targets. Potential impact may be used by an investor to report to LPs, or as a tool to guide decision making for the startup (e.g. which potential markets for a platform technology is most impactful).
Alternatively, an investor could intend to show the report to LPs, or use it as a tool to guide decision making for the startup (e.g. which potential markets for a platform technology is most impactful).
This Case Study was developed by the Project Frame Content Working Group with the intention to advance the practice of forward-looking emissions impact assessment by showcasing different approaches and tools. Project Frame invites investors to share their own examples and provide feedback to help us improve our case study format and impact assessment guidance by reaching out to impact@primecoalition.org.
Project Frame Case Studies include links to reports generated by the CRANE Tool, a free, open-access software aligned with Frame’s approach to future emissions impact assessment that is co-created by Prime Coalition and Rho Impact. By including CRANE reports in Case Studies, Project Frame intends to demonstrate how tools like CRANE can be used to conduct impact assessments and reduce barriers to impact accountability.
Project Frame is not a regulatory body, nor should its content be considered financial advice. Methodology guidance produced by Project Frame represents our contributors’ consensus and no one singular entity. Our work is intended for readers to review and use their best judgement to accelerate GHG mitigation with transparency and accountability.