Brent Whitehead and Matt Lohstroh, two University of Texas alumni, are building their fortunes by mining Bitcoin (BTC) from oil drilling flue gas, previously considered a waste with a huge environmental impact.
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. Back in 2019, people considered the idea of oil and gas companies joining forces with Bitcoin miners as cutting-edge.
Whitehead is an engineer who comes from a family with a long history in oil and gas production, while Lohstroh, is 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 the companies can easily truck the oil to a remote destination, gas supplies require a pipeline. If a perforation is right next to a gas pipeline, the gas pours through it, and the money that the buyer on the other side is willing to pay that day is accepted. However, if it is within 30 kilometers of a pipeline, drillers often burn it.
Gas is the Key Element
Unlike gas which is commonly referenced in the crypto world, (e.g. the price of gas on Ethereum), these entrepreneurs work with physical gas, which comes naturally from the geophysical characteristics of the earth, and oil companies extract it by drilling. This case usually occurs accidentally, since this gas does not bring greater benefit to the oil companies due to its expansion; not to mention its high environmental impact. In other words, the modification of gas reserves reports economic and environmental losses. It is here that this pair of entrepreneurs came up with a solution to both problems, with the help of the Bitcoin ecosystem.
Whitehead and Lohstroh’s Solution
Using the resources of Giga, the engineers have designed a transfer container in an oil well, which diverts natural gas to electric generators, responsible for converting the gas into electricity, used then as a source to feed energy to thousands of Bitcoin miners. The process reduces CO2 equivalent emissions by approximately 63%, as compared to burning gas, a traditional mechanism prior to innovation. This is according to the results of the research reported by Crusoe Energy Systems, based in Denver.
Shortly after learning about its success, Whitehead decided to give some statements to the CNBC medium regarding the factors that most motivated the design and implementation of his idea: “As I was growing up, I kept seeing flare-ups, just being in the oil and gas industry. It made me know how wasteful it was.”
Agreements with other Companies
Whitehead stated that they have signed agreements with more than 20 oil and gas companies. Giga also says that they are also in talks with sovereign wealth funds and that their opportunities are expanding rapidly. The entrepreneurial duo is part of a growing movement of people making big bets on the potential of Bitcoin mining to transform the economics of the energy industry. In addition, Giga executives strongly believe in the power of Bitcoin to create a kind of financial freedom.
Opinions external to the company have also been positive. According to Lee Bratcher, president of the Texas Blockchain Council, “they are generating revenue for their customers through Bitcoin mining, with energy that was previously wasted, while also solving the environmental challenge caused by flared gas.”
In most cases, if a gas well is not already near a pipeline, it will not 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 burn their methane, rather than burn it externally.
By Audy Castaneda