5 March 2024

This methane satellite changes the game for oil and gas finance

MethaneSAT will begin producing data that changes how the financial sector manages risk associated with oil and gas, writes Andrew Howell

SpaceX launches a rocket more than once a week. So when SpaceX Transporter 10 took off from Vandenberg Space Center a few minutes ago aboard a Falcon 9 rocket, it was just another day at the launchpad. But on board is a spacecraft, about the size of a washing machine, that will mark a step change in how the finance world engages with companies on climate change.

That spacecraft is called MethaneSAT, and its deployment will introduce dramatically improved transparency to our ability to spot methane emitted by the oil and gas industry. In our report, MethaneSAT: What You Need to Know, we answer common questions about how the finance community can leverage this new tool.

Andrew HowellToday, MethaneSAT begins a series of positioning, calibration, and commissioning steps. When the data processing platform is fully operational in early 2025, it will begin generating data on methane emissions across 80% of the world's oil and gas production zones, detecting both point source emissions and small, diffuse emissions across wide areas.

The data will be free to access on MethaneSAT's web portal and available on Google Earth Engine, where it can be analyzed and combined with oil and gas infrastructure overlays and other datasets. MethaneSAT data will allow stakeholders to identify outsized leaks and emissions and will provide a powerful new tool for monitoring and timely decision-making.

Investors, lenders, insurers and other financial service providers should take note of MethaneSAT's launch for three reasons.

First, methane from oil and gas is a major source of climate-warming emissions – and is one of the easiest and most cost-effective to abate, if you know where to find it. Methane may account for as much as half of many operators' Scope 1 emissions, when measured over a 20-year timeframe. Analysis by the IPCC finds that there is no plausible pathway to limit temperature rise to 1.5°C without deep reductions in methane emissions.

Second, the transparency enabled by MethaneSAT will introduce new levels of much-needed scrutiny of the oil and gas industry. Today, methane emissions are mostly estimated based on factors that often significantly understate actual emissions. The IEA writes that "most countries and regions still have little or no measurement-based data." Fortunately, the industry has started to move towards better measurement. Over 120 companies have joined the Oil & Gas Methane Partnership 2.0, the United Nations Environment Program-led measurement-based reporting framework for the oil and gas industry that improves the accuracy and transparency of methane reporting. Now, with MethaneSAT, the industry can finally move from estimated emissions to real, concrete, measured emissions data for all to see and act upon.

Third, MethaneSAT data enables a new standard for the financial sector's analysis of oil and gas assets. No longer will banks, asset managers, and others be captive to company-derived data or rough estimates from third party data providers.

"This new class of emissions data will enable more sophisticated risk analysis by a wide range of finance sector actors"

This new class of emissions data will enable more sophisticated risk analysis by a wide range of finance sector actors. The US banking sector provided over $700 billion of financing to the oil and gas industry in 2023, according to RAN's analysis of Bloomberg data. Oil and gas operators are frequent users of financial services, from debt capital markets to M&A to hedging. The insurance industry, for whom energy companies are a large source of premium income, will find that MethaneSAT data adds depth to their analysis when underwriting business risk. And, given the $10 trillion in market value of listed oil and gas stocks and bonds outstanding, MethaneSAT data is highly relevant for the asset management industry as well.

Later this year, MethaneSAT will begin producing data that changes how the financial sector manages risk associated with oil and gas. The countdown to new accountability is on.

What can you do now? Check out our report, MethaneSAT: What You Need to Know, to learn more about the transformative impacts of this new tool and how to prepare.

Andrew Howell is Senior Director, Sustainable Finance, Environmental Defense Fund