Is Crypto Mining with Associated Gas Better for the Environment?

Is Crypto Mining with Associated Gas Better for the Environment?

The Growing Use of Associated Gas in Bitcoin Mining

Back in 2018, when the crypto market was experiencing a bear market and prices were low, Sergii Gerasimovich, CEO and co-founder of EZ Blockchain, started exploring cheaper sources of power. He stumbled upon the concept of associated gas, a byproduct of oil drilling, which piqued his interest as a potential energy source for bitcoin mining.

Associated gas is the gas that is released alongside oil during drilling. Typically, oil producers burn off this gas, resulting in significant CO2 emissions. However, Gerasimovich discovered that this gas could be harnessed to generate electricity. He found that one oil well could produce enough natural gas to continuously power 1.5 megawatts of electricity, and there are thousands of such wells available.

Using associated gas for bitcoin mining or any other purpose, however, comes with technological challenges and costs. The gas extracted from oil wells is not pure methane but a mixture of various gases like butane and propane. This mix makes it expensive to produce power. Generators capable of producing 1 megawatt of power from associated gas can cost up to $700,000. For a 10-megawatt mining farm, the cost could reach $5 million, not including installation expenses. Additionally, the stability of the gas supply is not guaranteed, posing further challenges for miners.

Despite these obstacles, Gerasimovich was motivated by the idea of using otherwise wasted energy and potentially reducing greenhouse gas emissions. Associated gas, composed mainly of methane, is a significant contributor to global warming. By utilizing this gas for bitcoin mining, it could help prevent the pollution caused by gas flaring and put the associated gas to productive use.

However, the environmental impact of mining on associated gas is heavily debated. Critics argue that using fossil fuels to mine bitcoin prolongs the reliance on these fuels, hindering the transition to clean energy sources. Bitcoin mining powered by associated gas may increase the profitability of oil and gas drilling, ultimately delaying the shift away from fossil fuels.

To determine the truth behind these claims, let’s examine some numbers and facts.

Flaring Gas and Its Environmental Impact

Gas flaring, the process of burning off associated gas during oil production, is a significant waste and contributor to climate change. Methane, the main component of associated gas, has a greenhouse effect 25 times more potent than CO2. Flaring associated gas leads to the release of large amounts of CO2 into the atmosphere.

The International Energy Agency and the World Bank have recognized gas flaring as a detrimental practice. Cutting flare gas emissions to zero by 2030 is a global goal set by the World Bank. In 2022, oil companies emitted over 357 million tons of CO2 through gas flaring, which, if utilized for electricity generation, could have powered the entire Sub-Saharan Africa region.

Regulators in some regions are taking a more proactive approach towards eliminating gas flaring. For instance, in Colorado, authorities have banned flaring entirely, leading to a surge in oil producers embracing crypto mining as an alternative use for the associated gas.

The Economics of Mining on Associated Gas

Mining bitcoin using associated gas presents an opportunity to address the issue of wasted gas from oil drilling. Moreover, it might even be a more profitable venture compared to simply selling the gas as fuel. Estimates suggest that mining using the associated gas available in Russia could generate up to $1.4 billion in annual revenue for miners, while selling the gas would only earn the oil and gas companies $77 million.

However, using associated gas for mining is not without its challenges. The supply of gas is not consistent, varying throughout the day and causing interruptions in mining operations. The cost of associated gas is also not fixed, as oil and gas companies started charging for its use once more miners began utilizing it.

While the economics of mining on associated gas may not currently be the most attractive option, Gerasimovich believes that instead of mining on oil fields, companies like EZ Blockchain can provide equipment and technological services to the oil and gas industry for their own mining operations. However, the level of interest from the fossil fuel industry in this regard has been minimal, suggesting that the incentives are not yet compelling enough.

The Environmental Impact Debate

The use of associated gas for bitcoin mining presents conflicting viewpoints regarding its environmental impact. Some argue that bitcoin mining helps to reduce waste by utilizing the gas and mitigate the negative consequences of gas flaring. It provides a solution that makes economic use of a byproduct without further straining the energy system.

However, environmentalists contend that bitcoin mining on associated gas perpetuates the reliance on fossil fuels and hinders efforts to transition to renewable energy sources. They argue that the continued growth of the bitcoin network and its increasing energy consumption contribute to the climate crisis.

Mining on associated gas is seen by some as a potential distraction from the urgent need to reduce emissions. Environmental groups advocate for a shift away from energy-intensive proof-of-work mechanisms, which consume large amounts of electricity, to more sustainable alternatives like proof-of-stake.

Finding Common Ground

From an emissions perspective, converting associated gas into electricity is a better option than flaring. The efficient conversion of methane into carbon dioxide and water through flaring is not practical, with only around 91.1% of methane effectively destroyed. Comparatively, bitcoin mining offers a more efficient way to utilize this gas, preventing its release into the atmosphere.

However, achieving consensus on the impact of bitcoin mining on associated gas and the environment seems challenging. Gerasimovich believes that collaboration between the bitcoin mining industry and environmentalists is crucial to address the issue effectively. He argues that oil and gas drilling will continue for the foreseeable future, and miners can contribute positively to a problem that is not likely to disappear soon.

Ultimately, the debate surrounding mining on associated gas touches upon larger conversations about the broader shift away from fossil fuels and the pace at which it should occur. While mining on associated gas presents an opportunity to use wasted energy, it remains important to prioritize a rapid transition to cleaner energy sources and reduce greenhouse gas emissions.

In conclusion, the use of associated gas in bitcoin mining has both advantages and challenges. It offers a means to generate electricity from a waste product while potentially reducing the environmental impact of gas flaring. However, critics argue that it prolongs the use of fossil fuels and delays the necessary transition to renewable energy. As the blockchain industry continues to evolve, finding common ground between the environmental and economic factors will be crucial for sustainable growth.