Crypto miners see &quotstranded&quot natural gas as a novel energy source – Marketplace

Currently, when drillers finally get some crude out of a fractured oil well, they get a byproduct: natural gas.

Steve Barbour, a Canadian oil and gas engineer, has a useful analogy.

Reading: Natural gas bitcoin mining

“if you open a can of coke, you get a lot of foam. lots of gas comes out. same deal in an oil well, there is a lot of gas in solution. when you start producing that oil, the gas explodes,” he said.

If that well is near a pipeline, that associated gas can be sold to a power plant or used to heat homes. but some wells are very far from the pipes and it does not make economic sense to connect them. that gas is called stranded.

“If they can’t use it and they can’t sell it, they usually burn it,” barbour said. “sometimes they vent it”.

burning it, often called burning, is bad for the environment. it’s all the carbon dioxide with none of the benefits. venting it directly into the atmosphere is worse because methane traps more heat than carbon dioxide, accelerating global warming.

For years, barbour’s customers have asked what they can do with stranded gas from their wells.

In 2016, he came up with an idea. she learned about bitcoin mining, which runs computer servers 24/7; Tens of thousands of them around the world consume as much electricity as the whole of Poland.

he guessed that the stranded gas might provide some of that energy, but he also guessed he wasn’t the first to think of this.

“I couldn’t really find anyone publicly,” he said. “I checked all the forums and couldn’t find anyone talking about it. so I just built a, well, it took a while, but I designed and built the prototype, implemented it, and then started my business based on that.”

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What he built was a gas-powered generator connected to a shipping container filled with crypto mining computers. that was in 2019.

To boost some business, he posted a video of his prototype on twitter.

The video caught the attention of Matt Lohstroh. he was studying finance at texas a&m university but had bought his first bitcoin in 2016 and said he spent all his time trying to figure out how to make bitcoin mining his profession.

“My best friend, he had a well-known reputation for being an oil and gas family,” Lohstroh said. “So I called him. I said, ‘can you do this?’ He said: ‘yes, we have an oil well. Do you want to try it?’ and we go from there.”

his friend’s family has oil wells on about 100 acres in buna, texas, about a two-hour drive from houston. They purchased one of Barbour’s mobile mining units and installed it in one of the pits there.

lohstroh said they tested the efficiency of the unit, decided to tweak a few things, and started building gas-powered mining rigs themselves. they call their business giga energy.

lohstroh explained how a “gig box” works that sits next to an oil well in south texarkana, texas. around $150,000 gets you a wired container; generator and mining devices are additional. the box may contain more than $1.5 million worth of computers.

“You have a natural gas well, it’s producing oil, it’s going to flow out the top pipe, and then you have natural gas flowing out the bottom pipe that goes 8,000 feet into the ground,” Lohstroh said as he walked the well. “So, natural gas flows like a miniature pipeline. and then we take it to the generator and literally just screw it into the generator, the input of the generator. so you have about 87,000 cubic feet of natural gas burned per day. that crankshaft turns a generator, that generator turns off the electricity.”

according to lohstroh, this unit produces enough electricity to power about 720 homes in the area.

In the world of bitcoin mining, that’s an extremely small scale. A much larger mine in Rockdale, Texas, has the capacity to use enough energy to power 333,000 homes.

lohstroh said expanding is his company’s next mission. he has signed agreements with more than 20 smaller oil and gas companies.

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He doesn’t expect to sell one of his rigs to a major oil company anytime soon because large publicly traded companies are traditionally very cautious. but he said it seems more and more of the larger energy companies are becoming interested in cryptocurrencies.

“And the way to find out is to say, ‘hey, just sell me your gas, sign a gas purchase agreement. You don’t take any capital risk and you get all the benefits of selling your gas,'” he said.

oil giant conocophillips confirmed that it is running a pilot program in the bakken shale in north dakota. Instead of burning stranded gas, it sells it as fuel to third-party crypto miners. exxonmobil is reportedly doing something similar.

This sounds like a win-win, right?

“We absolutely should be capturing waste gas for power,” said Michael Webber, a professor of energy resources at the University of Texas at Austin. “So the idea of ​​taking waste and turning it into electricity is a great idea. turning that electricity into something of added value, also a great idea. Is crypto mining the best use of those electrons? I mean, I don’t know.

Those who believe bitcoin mining will make them rich argue that it is, in fact, the best use of those electrons. On the surface, finding a use for natural gas that would otherwise go to waste is economically efficient, at least in the short term. but some are not convinced.

“These kinds of things are effective subsidies for continued oil and gas production,” said Paasha Mahdavi, an assistant professor of political science at the University of California, Santa Barbara, who studies methane mitigation measures. “Basically, they are providing a new source of demand for fossil fuels.”

“it’s like you have a broken gas line at home. instead of fixing that problem, he just bought a new gas dryer and lets it run forever without clothes,” he said. “That is not a solution. that’s effectively what you have here with crypto mining and any kind of stranded gas or flared gas sites.”

mahdavi doesn’t envy businessmen for finding solutions to the problem of stranded natural gas.

But instead of monetizing that flared gas, he thinks it would be much better to give oil and gas companies an incentive to fix leaking pipes and deal with the bigger problem of greenhouse gas emissions.

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