Drilling for oil and mining for Bitcoin is a match made in heaven. The sooner energy giants realise this, the better it is for the climate and their bottom line.
Petronas has a problem.
Its CEO Tengku Muhammad Taufik didn’t pull any punches when he said that Petronas’ golden days of oil refining profits are over, saying its financial performance will fall short of last year’s.
In addition to its projected profitability, Petronas also reported that it achieved a 10.5% reduction in greenhouse gas emissions and an 18.7% reduction in flaring and venting emissions. This might sound good, but it is not nearly enough to meet its net zero goals.
What if in one fell swoop, Petronas could boost profitability and drastically reduce greenhouse gas emissions? Let’s see how Petronas can achieve this.
When a company drills for oil, it often doesn’t just find an oil well that can be tapped into. There is usually an abundance of trapped natural gas that accompanies the oil. However, in most instances, it is not economical to capture this natural gas as, unlike oil, which can be packed in barrels and transported across the world, natural gas requires a pipeline.
And since many oil wells are in remote locations or off-shore, especially Malaysia’s, it makes little economic sense to build an infrastructure of pipelines to route this natural gas. So to get rid of this natural gas (which if unvented, could result in explosions due to the high pressure it exerts), most oil wells flare it, meaning they burn it off. This is an obscene waste of natural resources.
Here’s a highly combustible, energy-rich stream of gas that could power the homes and lives of millions. But instead of using it, oil companies around the world are burning it off. They burn it instead of letting it vent as natural gas is methane-rich, a greenhouse gas 80 times more detrimental to the environment than carbon dioxide over a 20-year time frame.
The World Bank, which thinks this problem is acute, estimates that the roughly 10,000 gas flares around the world can power all of sub-Saharan Africa. To mitigate this, it has started a Zero Routine Flaring by 2030 initiative to end all flaring activities by 2030.
However, there’s realistically no way this is going to happen with how things are progressing now, as the chart below illustrates:
As can be seen, even as flaring intensity has decoupled very slightly from oil production, we’re nowhere near close to ending flaring, and especially not before 2030.
And Malaysia is one of the largest contributors to this flaring, as can be seen from the chart below from The World Bank:
But what if there was now a way to put all this wasted natural gas to good use? What if we could end flaring once and for all while creating economic value?
Enter Bitcoin mining.
The Bitcoin protocol uses energy to create monetary value. It is energy agnostic, meaning it is happy to gobble up any and all types of energy, irrespective of its origin and source. And most importantly, the machines needed for Bitcoin mining are modular, mobile, can be scaled up and down depending on need and can be placed right at the source of the energy.
In a nutshell, Bitcoin mining is a fantastic solution to the problem of gas flaring. Instead of wasting the gas by just venting or flaring it, it can be fed into a generator and used to power Bitcoin mining rigs, which will convert it into Bitcoin. And with one Bitcoin worth around RM120,000, this is a lucrative activity.
This isn’t a novel idea.
Brent Whitehead and Matt Lohstroh, two Texas collegemates, were so gripped by the potential of Bitcoin to solve the problem of flared gas that they created a company called Giga Energy to address it.
Giga does exactly what this article outlines – it places a shipping container full of thousands of Bitcoin miners on an oil well and routes the natural gas into generators that convert the gas into electricity to power the miners.
According to Denver-based Crusoe Energy Systems, this process reduces carbon dioxide-equivalent emissions by a huge 63% compared with flaring. Additionally, Bitcoin mining is a boost to the bottom line of the company
In 2021 alone, Giga Energy, still a startup in its infancy, made US$4 million, thanks to striking deals with more than 20 oil and gas companies to supply them with Bitcoin mining rigs to solve their gas flaring problem. Thanks to its continued success and traction, it raised a US$10 million Series A funding round just a few months ago.
It’s just a matter of time before many oil and gas companies wake up to the fact that Bitcoin mining is great for the environment, their ESG rating and their bottom line. So, Petronas has the opportunity to be a pioneer in the industry in the region if it starts now, and not wait to follow others.
Here’s hoping that Petronas has the foresight and fortitude to strike a bold new path for itself.