Cryptocurrency, unconventional resources, artificial intelligence, renewable energy, reduced carbon emissions.
Put those trendy topics into the same bag and shake well.
The resulting mixture could be a boon for the energy industry, especially for operators with stranded natural gas production.
In December, the municipal district of Greenview in Alberta, Canada, announced plans for the world’s largest artificial intelligence data center complex. The project, known as “Wonder Valley,” will be developed by O’Leary Ventures.
The development company calls itself a “generalist venture-capital investment platform” headed by Canadian investor and entrepreneur Kevin O’Leary. Known by the nickname “Mr. Wonderful,” O’Leary is a long-time host of the U.S. business reality TV series “Shark Tank.”
“Given existing permits, proximity to stranded sources of natural gas, pipeline infrastructure, water and a fiber optic network within just a few kilometers of the Greenview Industrial Gateway, we will be in the ground and up and running sooner than any scale project of its kind,” O’Leary said.
Proximity to stranded natural gas is a key concept for the venture, and for many in-field electricity generation and in-field computing projects. In the United States, the availability of low-cost gas supply has fueled an interest in in-field computing for Bitcoin mining.
Chris Alfano, CEO of 360 Energy in Austin, Texas, will discuss that trend in the presentation “Monetizing Waste, Minimizing Emissions: Turning Liability Gas Streams into Cash-Generating Assets,” on Feb. 6 at the 2025 NAPE Summit in Houston.
Looks Good on Paper …
The idea of using stranded or price-disadvantaged gas to generate electricity for high-performance computing centers emerged about five years ago. Alfano said his company was founded in 2021, with gas production in the Barnett Shale and the glimmer of an unproven concept.
“It looked great on a spreadsheet. It was extremely challenging to implement with what was available in the oilfield,” Alfano explained.
“We stepped into just about every damn bear trap there was in trying to figure this thing out,” he said.
The company “poured millions into R&D” before perfecting an operating approach, he said. It then transitioned to working with other gas producers to install in-field generation and computing.
“We switched to a service company in 2023. Today our primary business model is offering this as a service to other energy companies,” Alfano said.
Bitcoin mining consumes huge amounts of computer power and computer time to solve cryptographic tasks, and complexity levels increase as miners generate valid solutions. Early Bitcoin mining could be done on a large home computer; it now requires networks of data centers.
Alfano said there are three main value propositions for natural gas producers who want to pursue in-field power generation and computing for bitcoin mining. The first is for operators who are producing and selling gas “but maybe aren’t making too much money doing that right now.”
“Think of large, skid-mounted, gas-fired generators, and next to that is a data center,” Alfano said.
At current prices, “the data generated by the data center factors back to $13 per (thousand cubic feet),” he said.
“The second value prop is on a stranded gas or flared gas proposition,” Alfano noted.
“This is a way to stop wasting gas. You’re taking a liability gas stream that’s accruing fines and emissions charges” and making money on it, he said.
“The third value prop is to help the operator make more oil,” he said.
Some unconventional oil producers – especially in parts of the Permian Basin – have no available, economic outlet for their associated gas production. Drilling additional oil wells only compounds the excess gas-supply problem.
“If you don’t have a pipeline or if you’re in a place pipelines are never going to get to, you’re probably not going to drill that oil well. You’re just not able to go around flaring gas all the time like you used to,” Alfano said.
It’s not a small problem. Natural gas prices at the Waha Hub in the Permian Basin area of West Texas turned negative several times during 2024.
“The best place to do this (in-field generation) is where gas is disadvantaged. And where gas is disadvantaged is where there isn’t a pipeline,” Alfano said.
“Where it’s probably not as good a place is somewhere like the San Juan Basin,” where gas can be moved readily at a price premium, he said.
Energy-Hungry AI
Computer processing for artificial intelligence also is boosting the outlook for electric power demand. The Electric Power Research Institute has projected that data centers could soak up 9 percent of all U.S electricity generation by 2030, double the current level.
In December, ExxonMobil revealed plans for a major gas-fired power plant targeted for producing power for data centers. The company did not disclose the location but said it has already secured land for the plant, with a reported output capacity of more than 1,500 megawatts.
Diamondback Energy also is reportedly considering gas-fueled generation projects, most likely in the Permian Basin, for its own operating needs. U.S. energy companies have increasingly switched to electrified field operations.
With an in-field generating plant, “you can power ESPs (electric submersible pumps). You can power microgrids and oilfield equipment, if you need to. You can possibly sell electricity back to the grid,” Alfano said.
ExxonMobil reported that its commercial generation project will capture more than 90 percent of the facility’s CO2 emissions. Lowering emissions has become a selling point for in-field generation, through reduced flaring and venting, increased efficiency and even the addition of renewable energy sources.
At the Wonder Valley project in Alberta, “we want to deliver transformative economic impact and the lowest possible carbon emissions afforded to us by the quality of gas in the area, our efficient design and the potential to add geothermal power, as well.
“Together, these factors create a blueprint for sustainability and success that can be recognized worldwide,” O’Leary said.
Wonder Valley will target low-cost power for “hyperscalers,” he said. Those companies offer cloud computing and storage, and can scale up capacity quickly to meet demand. The project will be able to draw on established Western Alberta gas fields and Montney-Duvernay shale unconventional gas, accessible transmission lines and nearby fiber optics.
Alfano said, “from our perspective, it’s like a needle in a haystack finding all those things in the oil field.”
Data centers providing processing for artificial intelligence “are required to be online 100 percent of the time. Bitcoin mining is perfectly interruptible,” Alfano noted. “You’re not going to be able to do that kind of computing (for AI) with what you find in an oilfield.”
Boon, or Boondoggle?
Alfano said his company has two basic business models for companies that want to get into in-field generation and cryptocurrency. The first is designed for the operator who wants to preserve drilling capital and needs to get rid of a flaring problem or other excess gas problem.
“Those are home-run deals. We’ll bring all the capital needed for the infrastructure,” he said.
In the second, the operator supplies the required capital and 360 Energy provides its experience and expertise.
“To put some round numbers on it, a 300 (thousand cubic feet per) day implementation costs $2 million capex for a fully deployed operation,” Alfano said.
Combining gas-fired, in-field electricity generation with in-field data-center computing has just started to catch on as a viable concept for the energy industry. Alfano said his company has gradually seen the idea gain ground for the past several years.
“In ’21, they laughed us out of the room. In ’22, we caught the attention of some mom-and-pops, some smaller companies,” he said.
In 2023, NAPE introduced its Bitcoin Mining Hub, partnering with the Texas Blockchain Council.
Alfano said 2024 was the year the idea started to break through to a broader audience.
“What was perceived as extremely risky is now being perceived as not so risky on the Bitcoin side,” Alfano noted.
And “abroad, the opportunity’s 20 times bigger,” he said.
Proponents of in-field generation and cryptocurrency mining emphasize the economic and environmental benefits as a boon for the energy industry. Skeptics point out the volatility of both gas and Bitcoin pricing and observe that “boon” is not far from “boondoggle.”
“Bitcoin mining is a commodity production business just like oil and gas,” Alfano acknowledged. “We cannot control the clearing price of the commodity, and the hedging mechanisms just aren’t there yet. You’re sitting there naked producing that commodity,” always vulnerable to price swings and risks, he said.
And at this point, any energy company just considering a move into in-field generation and computing still faces a sharp and steep learning curve.
“As a newbie getting into this, you don’t know what you need to know,” Alfano observed, “and there are about 10,000 things you need to know.”