When Brent Whitehead and Matt Lohstroh were sophomores at a University of Texas they decided to get into the business of mining bitcoin in the eastern oil fields of the state. It was 2019, when the idea of ??oil and gas companies joining forces with bitcoin miners was considered cutting-edge.
Whitehead is an engineer who comes from a family with a long history in oil and gas production, and Lohstroh, a finance student with a passion for bitcoin. They decided to use all the money they had saved at Giga Energy Solutions, a company that mints bitcoin from stranded natural gas.
For years, oil and gas companies have wrestled with the problem of what to do when they accidentally collide with a natural gas formation while drilling for oil. While oil can be easily trucked to a remote destination, gas supplies require a pipeline. If a perforation is right next to a gas pipeline, the gas is poured and the money that the buyer on the other side is willing to pay is accepted on that day. But if it’s within 30 kilometers of a pipeline, drillers often burn it.
Beyond the environmental implications of flared gas, drillers also lose money. For these two young men this was a big problem with an obvious solution.
Giga places a container filled with thousands of bitcoin miners in an oil well, then diverts the natural gas into generators, which turn the gas into electricity which is then used to power the miners . According to the company, the process reduces CO2 equivalent emissions compared to continuous burning.
Agreements with more companies
After this discovery, Whitehead told CNBC that they have signed agreements with more than 20 oil and gas companies. Lohstroh and Whitehead are part of a growing movement of people betting on the potential of bitcoin mining to transform the economics of the energy industry.
“They are making their customers earn income through stranded energy bitcoin mining and solving the environmental challenge with flared gas at the same time,” said Lee Bratcher, president of the Texas Blockchain Council.
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In most cases, if a gas well isn’t already located near a pipeline, it won’t be large enough to justify the time and expense of building an entirely new line. With this, bitcoin makes it economically sustainable for oil and gas companies to flare their methane, rather than externally flare it.