Matt Lohstroh is an undergraduate at Texas A&M University who helped develop the idea of mining cryptocurrencies in wells using stranded natural gas.
The end result of his Giga Energy is less aeration and flare in oilfields and cheaper electricity to power cryptocurrency mining operations.
Lohstroh spoke with Hart Energy at the 2022 Energy Capital Conference in Dallas on October 25.
Jordan Blum: You also have a very unique company that started at a very young age. Can you tell us a little bit about what your company is doing to tackle the stranded natural gas problem, leverage bitcoin mining, and reduce bitcoin flaring?
Matt Rostro (00:35): absolutely. Our business seeks to reduce methane emissions by mining Bitcoin on real oilfield sites. It also has a very short lead time of around 3 months to accomplish this, making the investment in the process very cost effective. This is accomplished by manufacturing our own equipment. It manufactures a natural gas generator as well as a bitcoin mining container that holds the actual server and his ASIC.
JB: Can you give us a little bit of how the process works at the well site, so to speak?
ML (01:09): For producers, it’s actually pretty easy. We consider ourselves a digital midstream.
We approach producers and sign gas purchase agreements [and] Get surface rights for the area. The natural gas is then tapped into one of our in-house built natural gas generators. Then transfer that power from the generator to the container. The container dissipates the electricity in a safe, waterproof and cool way. Then power these bitcoin mining computers and generate revenue every day. , based on Net One.
JB: How did this process gain buy-in and overcome the initial skepticism about cryptocurrency mining in a wellhead, so to speak?
ML (01:58): Believe it or not, it wouldn’t surprise me to see the words bitcoin and natural gas appearing together when watching videos today, just like in today’s conversation. Three years ago, when we started this and tried to pitch this idea on NAV, everyone thought we were crazy. Now, can we get our energy at a better price? And people are wondering, can we mitigate these methane emissions in the field? Can we reduce the amount of flare we’re experiencing in that area? We had a very real conversation today.
JB: And can you tell us a little more about how your company found its early successes with companies willing to circumvent rules on the front lines of regulation?
ML (02:33): Unfortunately, initially we started working with producers who were emitting natural gas. I don’t know if you know that methane as a greenhouse gas is 25 times worse than he is CO2. When combusted, methane CH4 turns into CO₂. Venting is the process of venting gas without burning it in a flare. So that was one of the first things when we started, we discovered that the producers who were actually emitting gas came in and allowed their production to close. did.
JB: Remember when you started working for Texas A&M a few years ago? How did you come up with this idea when you were still an undergraduate?
ML (03:14): Our company Giga Energy—Texas A&M gig, we’re very passionate about it. Many employees are from Texas A&M. We started his junior year at Texas A&M. My co-founder, Brent Whitehead, is third generation in oil and gas.
And then I saw a tweet on Twitter from someone in Canada actually doing this. I called Brent right away and said, “Hey, do you want to do it?” And he’s like, “I got gas.” So we quickly flew to Canada, found the product, purchased it, and brought it home.Within two months we had a working prototype and continued product iterations from there.
JB: Let’s go back to 2022. Can you tell us how the cryptocurrency crash and massive price drop is going?
ML (03:56): Luckily, we started in a bear market, making us the second person in Texas to mine bitcoin with natural gas. So I knew very well what it was like to operate in an environment without money. Then on December 15th, 2020, Bitcoin broke his $20,000 and everything went crazy. And 2021 is all about this massive bull market that ended around November.
Bitcoin mining profitability has dropped by 83% since November 2021. We’ve seen a lot of people go bankrupt with debt and a lot of foreclosures and bankruptcies. We have the lowest large-scale energy production by using flared natural gas as our power source.
JB: In the same way, stranded natural gas is still a big problem, but with everything that’s happening in the world, the demand for natural gas is also increasing significantly. So how does it balance?
ML (04:54): So it’s clear that there are all sorts of sections in flare gas, the situation in Russia and Ukraine, the huge spike in energy prices and the continued growth. Fortunately, most of the applications we are starting to expand internationally are isolated from those markets, so we can set fixed prices that are not attributed to Henry Hub in such cases.
JB: So there are a lot of long-term bulls here?
ML (05:20): There are many bullish voices in Giga Energy.