The state of Texas is not known for being short on its supply of oil. The Eagle Ford Formation alone was responsible for producing more than three-hundred million barrels of black gold in 2013, and although output has dropped significantly in the region over the last two years, the oil industry remains an enormous part of the area’s economy.
With the importance of that oil economy in mind and the recent drop on everyone’s minds, some, such as Jean Ann Salisbury and other Bernstein analysts, believe that oil producers in Texas should be doing whatever they can to profit from what they currently write off as waste. That waste, as you might have guessed, is the product and energy which is lost to ‘gas flaring’. Studies in the United States are difficult to come by, but some researchers report that, for example, the country of Nigeria loses upwards of $2 billion dollars a year to gas flaring. It’s difficult to imagine that American entities would be disinterested in getting back some of their flare related loss as well.
So what is to be done with this waste product? According to the Bernstein analysts, the flare off could be used to power Bitcoin mining operations. The financial benefit of mining Bitcoin has been reduced since the most recent halving occurred in July of 2016, but there are still more than a million coins to mine until the next halving and an opportunity for profit could exist until that time. The only real limiting factor is the price of Bitcoin. Research suggests that this window of profitable opportunity for the oil producers in Texas will only stay open should the price of Bitcoin average nearly $19,000 per coin over the next fifteen years.
This is all, of course, theoretical. There have been no solid indications that oil producers in Texas will be taking the advice of the Bernstein analysts. With that in mind, however, it does seem like the oil and gas market is getting more and more comfortable with the idea of using blockchain technologies. The Venezuelan Petro Coin is gaining legitimacy and financial support, Aramco is launching their ICO very soon, and even companies such as WellSite are cropping up, giving credence to the idea that producers are willing to move towards smart contracts in order to conduct business.
Probably the most notable example of the adoption of this kind of technology, however, comes from Iron Bridge Resources in Canada. The Alberta based oil and gas company announced in January of this year that it would commence cryptocurrency mining operations out at its site in Elmworth, Alberta. Unfortunately for the Canadian company, the move toward mining has done little to create value for their shareholders. Since the move toward crypto mining, the share price of IBR has dropped by about 25%.