View of the Exxon Mobil refinery in Baytown, Texas.
Jessica Rinaldi Reuters
ExxonMobil, the leading U.S. oil and gas producer, is piloting a project to dig up bitcoins in North Dakota, according to people familiar with the matter.
For more than a year, Exxon has been working with Crusoe Energy Systems, a Denver-based company, said people who asked not to be named because details of the project are confidential. Crusoe’s technology helps oil companies turn lost energy or flare gas into a useful resource.
Similar to the ConocoPhillips digging scheme in the Baku area of North Dakota, Exxon diverts natural gas that would otherwise be burned into generators that convert the gas into electricity used to power shipping containers filled with thousands of bitcoin diggers. Exxon launched the pilot model at the end of January 2021 and expanded its construction in July.
Although Exxon did not speak publicly about his work in the space, Eric Obrok, a 10-year veteran of the company, said on his LinkedIn account that from February 2019 to January 2022, he “proposed and led the first successful commercial and technical demonstration of the use of Bitcoin Proof-of-Work digging as a viable alternative to burning natural gas in oil. “
Obrock’s title in his profile is the NGL industry’s forecasting advisor for the liquefied natural gas market. Obrok told CNBC in a message on LinkedIn that he had been advised not to speak to the media on the subject. Exxon did not respond to a request for comment.
Exxon’s Bitcoin project is not really about making money from cryptocurrency. Rather, the company is committed to reducing emissions as part of the industry’s efforts to meet higher environmental requirements. In early March, Exxon joined other oil companies in their commitment to the World Bank’s Zero Routine Burning to 2030 initiative, launched in 2015.
The type of cryptocurrency agreement that follows with Crusoe reduces CO2-equivalent emissions by about 63% compared to the continued burning of torches.
Exxon’s work on digging bitcoins in North Dakota was first reported by Bloomberg, which said the company was also considering similar pilots in Alaska, the Qua Iboe terminal in Nigeria, Argentina’s Vaca Muerta shale deposit, Guyana and Germany.
Digging bitcoins in Bakken
The problem that Exxon and Conoco have been dealing with has existed for years: What happens when drilling accidentally hits a natural gas formation?
Unlike oil, which can be transported by truck to a remote destination, gas supply requires a pipeline. If the drilling site is close to a pipeline, manufacturers can sell it immediately. But if the pipe is full or if the gas is 20 miles away, drilling often burns it. That’s why you usually see flames rising from oil fields.
In addition to environmental hazards, drilling also burns money.
Enter bitcoin digging, which requires only an internet connection and can be done from anywhere. And because miners’ main variable price is energy, they are encouraged to find the cheapest sources of energy.
“It’s just a great way to bring this demand to waste and solve two problems at once,” said Cully Kavnes, president of Crusoe, whose supporters include Valor Equity Partners, one of Tesla’s biggest investors. “Solve the energy appetite of bitcoin and solve the problem of stagnant energy and flare gas for the energy industry.”
Cavness said Crusoe has 150 employees and works with Norway’s Equinor ASA, Canadian oil producer Enerplus and Devon Energy, based in Oklahoma City.
Permits from the North Dakota Air Quality Division show that the Crusoe can run 20 portable engines, 11 of which are currently used in wells across the state. Two of the engines run in wells operated by XTO Energy, Exxon’s oil and gas fracking subsidiary at the Jorgenson Deep Creek site. Cavness said most of Crusoe’s more than 80 data centers are located in Bakken.
“I really move the needle at increased volumes,” Kavnes said. “More than 10 million cubic feet of gas a day that will be burned is not burned because we have deployed our systems.”
The World Bank in its latest report on a partnership to reduce gas combustion globally recognized Crusoe as offering an innovative solution for flare burning.
Solve the methane problem
The Bakken Formation has become an important source of new oil production in the United States over the past few decades with a boom in hydraulic fracturing.
Craig Thorstenson has been working on the North Dakota Air Quality Licensing Program since 1989. He says North Dakota has always been an oil state to some degree, but Bakken’s growth has put the state second in the country before to retire in third place last year.
Thorstenson, who was born and raised in Bismarck, the state capital, said the change was “quite a shock to us.” Residential housing could not cope with the demand.
“We had a population boom,” Thorstenson said. “People who come want to find a job. People living in Walmart car parks.
More drilling meant more gas loss, which affected the entire Williston Basin, which extends to parts of Montana, Dakota and Canada. This is a big reason for Crusoe to invest heavily in the area.
“In moments from not-so-distant history, the pool burned to almost a fifth of the gas produced there,” Kavnes said.
Thorstenson said the amount of wasted natural gas was finally declining. In a March report, the North Dakota Department of Natural Resources estimated that 93% to 94% of natural gas is currently being captured. In 2014, the commission had a capture target of 74%.
Historically, drilling has chosen torch burning as a way to dispose of excess gas because it is less harmful to the environment than a release that releases methane directly into the air and produces greenhouse effects that have proven to be 84 to 86 times more powerful than CO2 over a 20-year period.
Even during combustion, some methane is released due to wind and other factors. Extracting bitcoins on site can be particularly impactful, as 100% of methane is burned and nothing leaks or is released into the air, according to Adam Ortolf, who runs U.S. business development for Upstream Data, a company that makes and supplies portable mining solutions for oil and gas facilities.
“No one will run it through a generator unless they can make money because generators cost money to acquire and maintain,” Ortolf said. “So, unless it is economically sustainable, producers will not burn gas internally.”
Crusoe systems are designed to make the process financially viable for drilling. The company is introducing its equipment on the oil rig, which allows it to convert otherwise wasted natural gas into electricity, which then feeds the calculations at the well site.
“When we run it through our generator, we get up to 99.9% combustion of this methane,” said Kavnes. “Not only do we use otherwise wasted energy, but we also significantly reduce methane emissions.”
Kavnes said his main conclusion from the last UN climate summit in Glasgow, Scotland, was that methane was a low-hanging fruit.
“This is what we want to solve as an energy industry,” he said.
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