Canadian oil and gas company burns its natural gas to power a bitcoin mining facility, instead of ‘selling it for next to nothing’

Canadian oil and gas company Iron Bridge Resources (IBR) has come up with an unconventional workaround for the natural gas price downtrend. Instead of selling natural gas for next to nothing, the company has decided to burn the gas to produce electricity and use the electricity to operate a bitcoin mining facility.

Iron Bridge Resources will launch a wholly-owned cryptocurrency mining and hosting operation called Iron Chain Technology (ICT). According to a press release, the subsidiary will own and operate cryptocurrency mining facilities located at Canadian oil and gas field sites in Elmworth, Alberta, taking advantage of cheap, clean burning natural gas to generate its own electricity.

Alberta’s benchmark AECO natural gas prices have been on a steep downtrend in recent months, falling into negative territory on multiple occasions, meaning producers have had to pay customers to take their gas.

AECO gas is worth $1.43 per thousand cubic feet on a 12-month futures contract, and Iron Bridge often pays up to $1.30 per mcf in processing and transportation fees, the company said.

By burning the gas to power a bitcoin mining facility, Iron Bridge could earn up to $49 per mcf for its gas – more than 30 times the price it currently receives, according to estimates sent to clients by GMP FirstEnergy vice-chairman and co-head of energy sales and trading Trent Boehm.

“It was driving me insane to be handing off – from pretty much October onwards – our gas for next to nothing,” Iron Bridge CEO Rob Colcleugh said.

 

Iron Bridge Resources currently produces enough natural gas to power a 45 MW cryptocurrency mining facility and expects to significantly increase its gas production within the next two months.

The project will only involve a relatively modest initial investment, as a result of IBR’s ability to leverage existing infrastructure and excess power generation from the company’s Elmworth hydrocarbon processing battery, fired by clean burning natural gas production.

To reduce costs, IBR plans to avoid mining gear that is currently experiencing high levels of demand and opt for components that would be challenging to use in typical grid-connected and warmer climates.

The company has already started mining bitcoin, but wants to remain flexible with regard to the type of cryptocurrency that gets mined going forward.

“The economics are very variable based on the coins but the numbers suggest there’s an awful lot of room in here for prices to collapse and still have vastly better returns – even after paying for the equipment – than selling your gas at AECO,” Colcleugh said.

 

IBR is also interested in pursuing industrial scale hosting opportunities and is currently discussing possible deals with other natural gas producers.

“As far as I’m concerned, every dry gas producer in the industry should get a lift on this news, because boards of directors are going to wonder why companies couldn’t dedicate a portion of their production to this,” Boehm said.

 

Following the announcement, Iron Bridge shares jumped 16% on the Toronto Stock Exchange, but have fallen back since.

Image source: ExxonMobil