Matt Lohstroh was still a Texas A&M undergrad when he helped develop the idea of using stranded natural gas to power cryptocurrency mining at well sites.

The end results for his Giga Energy are reduced venting and flaring at oil wells and cheap electricity to power the crypto mining operations—a cliched win-win.

Lohstroh spoke with Hart Energy at the 2022 Energy Capital Conference on Oct. 25 in Dallas.

Jordan Blum: You have a very unique company that you started at a very young age, too. Can you tell me a little bit about what your company does with Bitcoin mining to tackle the stranded natural gas problem and, in a bit of a win-win, reduce flaring?

Matt Lohstroh (00:35): Absolutely. Our business is in the process of mitigating methane emissions through Bitcoin mining on the actual oilfield site. We also have extremely low lead times to accomplish this, about three months as well as extremely high efficiency of dollars invested into the process. We do this through manufacturing our own equipment. We manufacture the natural gas generators, as well as the Bitcoin mining containers that hold the actual servers and ASICs.

JB: Can you explain a little bit just how the process works at the oil well site, so to speak?

ML (01:09): It is actually quite simple for the producer. We think of ourselves as a digital midstream.

We approach the producer, sign a gas purchasing agreement [and] acquire surface rights to the area. We then go in and offtake that natural gas into one of our natural gas generators that we build in-house. We then transfer that power from the generator to the container, and that container breaks down that electricity in a safe fashion, in a waterproof fashion, in a cool fashion, which then powers these Bitcoin mining computers, which then generate revenue on a daily basis, on a net one basis.

JB: How has the process been getting buy-in and getting past the initial skepticism of cryptocurrency mining at the wellhead, so to speak?

ML (01:58): Believe it or not, like a conversation today, if you’re watching the video today, it’s not surprising to see the word Bitcoin and natural gas together. Three years ago when we started this and we were at NAV trying to pitch the idea, everyone thought we were crazy. Now, hey, can we get a better price for our energy? And people are thinking are we able to mitigate these methane emissions on site? Are we able to reduce the amount of flare and going on in the area? It’s becoming a very real conversation today.

JB: And can you explain a little more about how your company maybe found initial success with companies that were maybe willing to skirt the rules in the regulatory front?

ML (02:33): In the very beginning we started working with producers that were venting their natural gas, unfortunately. And I’m not sure if you know, but methane as a greenhouse gas is 25 times worse than CO₂. Methane CH4 when combusted turns into CO₂. Venting is the process of venting off that gas without combusting it in a flare. And so that was one of our first things when we started off, we went in, found some producers that were actually venting their gas came in and allowed them to shut that production away.

JB: Take me back a few years when you were first getting started at Texas A&M and just how this idea was generated while you were still just an undergrad?

ML (03:14): Our firm Giga Energy—Gig for Texas A&M, we’re very passionate about it. A lot of our employees are from Texas A&M. We started our junior year at Texas A&M. My co-founder Brent Whitehead, he’s third generation oil and gas.

And so I saw a tweet on Twitter of someone actually doing this in Canada. I instantly called up Brent and said like, “Hey, yo, can we do this?” And he is like, “I got some gas.” And so we instantly flew up to Canada, found the product, purchased it, brought it back. Within two months we had a running prototype, and from there we just continued to iterate on the product.

JB: Fast forward now back to 2022. Can you tell me how things are going with the cryptocurrency crash and prices down so much?

ML (03:56): We started in a bear market, fortunately, so we were the second guys in Texas to mine Bitcoin with natural gas. So, we really understood what it was like to operate in an environment where you had no money. Then Dec. 15, 2020, Bitcoin broke $20,000, everything went crazy. And so all of 2021 was this massive bull run, which ended in about November.

We’ve now had an 83% drawdown in Bitcoin mining profitability since November 2021. And so, we’ve seen a lot of people drop out in the space. We’ve seen a lot of people go under from debt and a lot of foreclosures and bankruptcies. And so, our firm’s handling it very well. We’re the lowest producer of energy at scale with using flared natural gas as our power source. And we’re going to continue to grow that.

JB: And on in that same vein, stranded natural gas is still a huge problem, but also with everything going on in the world, there’s a big increase in natural gas demand as well. So, how is that balancing out?

ML (04:54): So, flare gas comes in all sorts of sections and we’re obviously seeing with the Russian-Ukraine situation, massive spike in energy prices and continuing to grow. Luckily, most of our applications we’re starting to expand internationally are insulated from those markets, and so we’re able to set a fixed price that’s not attributed to Henry Hub in those instances.

JB: So, there’s a lot of long-term bullishness here?

ML (05:20): There is a lot of bullishness at Giga Energy.