Using Associated Gas for Bitcoin Mining Is Technologically Challenging and Expensive, But Environmentally Beneficial

In 2018, during a bear market in the cryptocurrency industry, Sergii Gerasimovich, the CEO and co-founder of EZ Blockchain, began researching cheaper sources of power. He stumbled upon associated gas, a byproduct of oil drilling, which he discovered could be a promising energy source for miners. Gerasimovich found that flaring gas from oil wells resulted in significant CO2 emissions, making it a wasted energy source that could be utilized.

Gerasimovich learned that a single oil well could generate enough natural gas to continuously power 1.5 megawatts of electricity, and there are thousands of oil wells available for use. However, utilizing this energy source for bitcoin mining or any other purpose is technologically challenging and not as cost-effective as it initially appears.

The gas emitted from oil wells is not pure methane but a mixture of different gases, such as propane and butane. This makes power generation expensive, with generators producing 1 megawatt of power from such sources costing up to $700,000. For a 10-megawatt farm, the cost could reach $5 million, plus an additional $1 million for installation.

Despite these challenges, Gerasimovich was drawn to the idea of using energy that would otherwise go to waste while potentially benefitting the environment by reducing the release of gas that contributes to climate change.

Associated gas, which consists of methane and other hydrocarbon gases, is a significant pollutant that contributes to global warming. When an oil well is drilled, the gas is released along with the oil, and drilling companies must find ways to prevent methane from entering the atmosphere. Flaring the gas, selling it, generating electricity, or re-injecting it into the ground are some common methods. Gerasimovich saw the opportunity to direct this byproduct to power generators and use it for bitcoin mining.

Supporters argue that mining cryptocurrency with associated gas helps reduce pollution from flaring, utilizing a wasted energy source. However, opponents claim that bitcoin mining using fossil fuels prolongs the dominance of oil drilling and delays the transition to renewable energy.

Building infrastructure for processing or delivering associated gas is generally expensive, leading many oil companies to resort to flaring, despite paying penalties. Flaring is considered a waste of money and has negative effects on climate change and human health. The World Bank has set a goal of eliminating flare gas emissions by 2030.

Regulators in certain regions are taking a more aggressive approach to eliminate flaring, which has prompted oil companies to explore alternatives. For instance, Colorado state authorities have banned flaring entirely, resulting in several oil producers mining cryptocurrency on their sites.

Using associated gas for mining can be more profitable than selling it as fuel. Estimates suggest that utilizing associated gas available in Russia could generate up to $1.4 billion annually for miners, while selling the gas only brings in $77 million for oil and gas companies.

However, there are challenges and limitations associated with using associated gas for mining. The availability of gas is not consistent enough to sustain continuous mining operations, as the output fluctuates throughout the day, making it more suitable for intermittent use.

Despite the obstacles, utilizing associated gas for cryptocurrency mining provides an environmentally beneficial solution to reduce waste and emissions from oil drilling operations. However, further advancements in technology and infrastructure are needed to overcome the technical and cost challenges associated with this energy source.