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Felicity Bradstock

Felicity Bradstock

Felicity Bradstock is a freelance writer specialising in Energy and Finance. She has a Master’s in International Development from the University of Birmingham, UK.

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Could Bitcoin Solve The Oil Flaring Problem?

As governments aim to curb carbon emissions from gas flaring, Bitcoin data centers offer a way to use this energy instead of letting it go to waste, in return for the digital currency. 

Gas flaring, a byproduct of fracked shale production, produces around 1 percent of global carbon emissions at present. Companies burn the gas off at the well site, rather than using it as an energy source, because of its unprofitable nature. The alternative option is simply to vent the gas into the atmosphere, releasing methane and adding to harmful greenhouse gasses that have a knock-on effect on the environment. 

However, several companies are calling for an end to gas flaring within the next decade and looking to find other uses for this energy.

Bitcoin producers realized this gas could be a great source of energy for small, transportable cryptocurrency data centers. One of the biggest problems faced by digital currency producers is the high price of electricity needed to farm the currency. But if this energy can be found cheaper from a product that would not otherwise be used, it could present the perfect solution for both industries. 

In 2019, it was discovered that Bitcoin required more energy than the entire country of Switzerland for mining. This figure increased in 2020 and it is estimated that the Bitcoin network consumes around 80 terawatt-hours per year.

But the swinging price of Bitcoin and the Covid-19 pandemic deterred oil companies from making a commitment until now. Bitcoin did not appear a viable long-term option due to its volatility, especially when the future of oil was also looking bleak in 2020. While some companies took the plunge and trialed a Bitcoin-for-gas program as early as 2019, this was a widely overlooked solution to flaring and venting.   Related: ExxonMobil Set To Outperform As Oil And Gas Prices Climb

Sergii Gerasymovych, the owner of a Bitcoin mining company, EZ Blockchain, reached out to oil and gas companies a few years ago to no avail. But “The market conditions have changed,” he explained. “Now, every oil and gas company we reached out to in 2018 is calling us back because they see Bitcoin is making a lot of money.”

Bitcoin is becoming increasingly attractive to companies looking to modernize and go digital with the price of the digital currency doubling during the last year, despite a pre-pandemic dip. 

EZ blockchain has recently set up five Bitcoin mines on gas sites, the latest in Utah with independent gas company Wesco Operating Inc. Other companies using the innovative solution include Crusoe Energy Systems Inc., which has introduced low-cost/no-cost ‘Digital Flare Mitigation’ programs with Bitcoin companies to put 20 data centers into action.

Other countries have also recognized the opportunity, with Russian companies developing similar projects. In January, Russian state-owned oil major Gazprom Neft has announced a successful pilot project that uses gas that would otherwise be flared to produce electricity to mine cryptocurrency at a Siberian drilling site.

Vekus was the first Russian cryptocurrency company to develop such an energy source for digital currency mining. Vekus used a shipping container to create an on-site mine, demonstrating the potential for digital currency mines to be placed on oil and gas sites around the country. 

Russia is the world’s biggest gas flare producer, followed by Iraq, the U.S., and Iran, which in total accounted for 45 percent of global gas flares in 2017-2019. 

Other cryptocurrency companies could make similar deals with oil and gas companies so long as they have proof of Work (PoW) option to process transactions. This could make digital currencies more sustainable in the long-term as electricity costs currently account for the majority of their production costs. 

As oil and gas companies are feeling increasing pressure from regulators and governments to curb their carbon emissions over the coming decade, Bitcoin-for-gas could offer a simple solution to put an end to flaring and venting. 

By Felicity Bradstock for Oilprice.com

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