Gas Recapture Revenue When Using Gas Mapping LiDAR for Methane Detection

Gas Recapture: Can Operators Find Revenue When Using Gas Mapping LiDAR and Recapturing Methane?

In our latest blog series, we’ve been diving into comparisons of potential emissions reduction when using the EPA’s standard program of OGI scans (‘Standard Program’) and the proposed alternative program using Gas Mapping LiDAR™ (GML) (‘Alt Program’), as well as the cost difference between using these two programs, which highlighted the importance of normalizing the cost per emissions detected.  

To recap the series so far, we calculated that the Alt Program using Bridger’s GML provides oil and gas operators with the opportunity to reduce, on average and across North American basins, a minimum of 39 tons per year (tpy) of methane emissions per site from their annual emissions inventories. Compared to the Standard Program, with an estimated 8 tpy per site of reduction, the Alt Program using GML can reduce nearly five times the mass of emissions. This doesn’t include the Alt Program’s detections of normal operating process emissions, which are also opportunities for emissions reduction.  When we translated these estimates into program costs, we found that the total cost per ton of emissions reduced was approximately $526 for the Standard Program and $106 for the Alt Program (using conservative assumptions). 

So, the bottom line is the Alt Program will detect more emissions, result in fewer repairs, and cost less (especially per ton of emissions detected), compared to the Standard Program. More details on these calculations and conservative assumptions used can be found in the respective articles: Emissions Reduction and Cost Savings articles. 
 

For this final piece in this article series, we dive into the cost (or revenue!) potential when we incorporate recaptured gas into the picture. The qualitative findings are particularly important considering the rising price of natural gas—around $6.50/MMBtu (June 2022, Henry Hub spot price). Now more than ever, fixing leaks and putting gas back in the pipes makes sense economically, in addition to the sustainability benefits.

For the calculations here, we used an estimated spot price of around $6.50/MMBtu, or roughly $6.50 per 1,000 scf (Mcf). Using a cost of $6.50 per Mcf of gas, we divide this by a conversion factor (0.020815) to get a value of $312 per ton of natural gas at current prices. 

Net Costs of Using OGI Standard Program with Gas Recapture

To assess the net cost of the Standard Program (quarterly OGI scans), we use the value per ton of natural gas at current prices ($312), and the estimated potential reduction of 8 tons per year (tpy) per site, and find $2,496 in potential gas value per year, per site if all leaks are fixed and this gas stays in the system. However, there are costs incurred to operate the OGI LDAR program (estimated at $4,204 for scanning, repair, and other costs and based on EPA estimates1). When we deduct the gross program operating cost for the Standard Program of $4,204 from the potential recaptured gas value ($2,496) from this, we find a net program cost of $1,708 per site per year. When this is normalized to the amount of potential reduction (8 tpy per site), this results in an estimated cost of $214 per ton of reduced emissions at a site using the Standard Program (quarterly OGI scans).

$6.50 Mcf / (Conversion factor (0.020815))  = $312 per ton of gas

$312 × 8 tons per year of potential reduction using Standard Program
= $2,496 value of recaptured gas - $4,204 gross program cost per year
= -$1,708 net program cost per year

OR

-$1,708 net program cost per year ÷ 8 tons per year
= - $214 net per ton per year cost to operator when gas is recaptured

 

Net Costs of Using GML Alternative Program with Gas Recapture

To compare the cost of the Alt Program using GML (bimonthly GML scans plus one annual OGI scan) and incorporating gas recapture, we use the same cost of $6.50 Mcf, and we again divide this cost by a conversion factor of 0.020815 to get $312/ton of natural gas (equivalent to the Standard Program, above).

The estimated potential emissions reduction found using the Alt Program was calculated to be 39.4 tpy per site. When we multiply 39.4 tons of gas per year, by the gas value per ton of $312, we find $12,293 in potential gas value per year, per site if all leaks are fixed and gas stays in the system. When we deduct the gross program operating costs of $4,183 for the Alt Program (for site scanning, repair, and other costs based on EPA estimates) we find a net program revenue of $8,110 per site per year. When this is normalized to the amount of potential reduction (39.4 tpy per site), this results in an estimated revenue of $206 per ton of reduced emissions at a site using the Alt Program.

($6.50 Mcf) / (Conversion factor (0.020815)) = $312 per ton of gas

$312 × 39.4 tons per year of potential reduction using Standard Program
=$12,293 value of recaptured gas - $4,183 gross program cost per year 
= $8,110 net program revenue per year

OR

$8,110 net program cost per year ÷ 39.4 tons per year
= $206 net per ton per year revenue for operator when gas is recaptured

Costs and Revenue Based on the GML Alt Program and the Standard Program

Yes, you read that correctly. Given the large mass of gas detected through the Alt Program using GML scans, operators will actually make money if they detect leaks with GML and repair the leaks to bring that gas to market. 

Based on our calculations, the Standard Program using OGI costs $1,708 per site per year, or normalized by emissions using this program, costs approximately $214 per ton of emissions reduced per year by keeping gas in the pipes. On the contrary, with the GML Alt Program, by detecting emissions and keeping gas in the pipes, revenue of approximately $8,110 can be created per year per site, equivalent to $206 per ton per year.