How Bitcoin Helps Oil Companies?

Bitcoin is often criticized for its high energy consumption. There recent GreenPeace campaign which urges the Bitcoin community to stop Bitcoin mining reflects the prevailing thinking on the subject. Bitcoin mining indeed consumes energy. This is a fact that the community does not deny. On the contrary, it has been a driving force to transform the industry and seek green initiatives to reduce its energy consumption.

One such initiative involves using burned natural gas to power Bitcoin mining farms. This approach aims to reduce emissions of methane, a greenhouse gas potentially more damaging than carbon dioxide.

Thus, some oil companies are starting to see this activity as an opportunity to reduce their carbon footprint and generate additional revenue. If the marriage between mining farms and oil companies does not seem obvious at first glance, the experiments carried out are more than promising.

In this article, we will explore how Bitcoin mining can help oil companies solve their excess gas problems and improve their profitability.

The problem of Bitcoin’s energy consumption

According to " Bitcoin Electricity Consumption Index » from the University of Cambridge, the Bitcoin network consumes as much energy as some countries likeArgentina or Sweden. This consumption results from the mining process, which requires powerful computers (ASICs) that consume electricity.

To reduce their carbon footprint, more and more Bitcoin miners are using renewable energy sources to power their mining centers. According to Bitcoin Mining Council, about 60% of the energy used in Bitcoin mining comes from renewable sources (wind, hydro, geothermal, etc.) since 2021. This means that today and after the closure of mining farms in China, the trend towards “green mining” is helping to reduce Bitcoin’s carbon footprint.

Different ecological solutions are being implemented today such as the use of'a hydraulic power plant in isolated villages in Africa, the exploitation of green electricity available in surplus (BBGS) Or the use of biogas in livestock farms, as we have or see in Ireland. Miners are competing with ideas to try to reduce their carbon footprint while seeking to optimize their electricity costs.

The African village that mines Bitcoin

A new, more surprising alternative is to reduce the greenhouse gas produced by oil companies. This is a new approach which could, according to the analysis using ESG criteria, Daniel Batten, help reduce methane emissions by up to 8,5% by 2030 and could reduce warming by almost 0,15°C by 2045.

Using excess gas from oil companies

When oil companies extract oil, they also produce natural gas in the extraction process. This gas, mainly methane, is often flared by default because it is not economically viable to store or transport it for other uses. Indeed, a whole new logistics infrastructure would be required to optimize the circuit of this gas. However, flaring contributes to the waste of a precious natural resource and contributes to greenhouse gas emissions. It is important to remember that methane is a much more potent greenhouse gas than carbon dioxide, which makes it a major environmental problem.

This is where Bitcoin mining comes in. New solutions involve valorizing these natural gases by using them to power Bitcoin mining farms. These initiatives are independent of the oil companies themselves. By using excess natural gas resources, they can generate electricity to power mining facilities, thereby avoiding flaring and adding value to these resources that are otherwise wasted.

A pilot project was implemented in 2021 with the oil company ExxonMobil which made it possible to supply the farms of Bitcoin mining from mining company Crusoe Energy. Rather than simply burning this gas and contributing to greenhouse gas emissions, Crusoe uses it to produce electricity needed to run his mining farm. According to one study of the Crusoe society, this method reduces CO2 emissions by 63% compared to the flaring process.

Methane gas is 28 times more damaging to the Earth's atmosphere than carbon dioxide and more than 20% of global warming can be attributed to methane gas (Borunda 2019).

Not only is this approach more environmentally friendly, but it also allows the company to generate additional revenue through Bitcoin mining operations.

The alliance of the oil industry and that of Bitcoin mining then seems to become a new solution which makes it possible to meet the demands of global warming. So, Crusoe Energy recently announced a new partnership in the Middle East region to collaborate with oil companies in the region. MENA region would be responsible for more than 38% of global flaring in 2020, and is one of the countries that practice the most flaring in the world. This then represents a considerable market for mining companies.

“The goal of Crusoe is to reduce routine flaring of natural gas.
Crusoe provides oil and gas companies with a fast, low-cost, and simple solution to natural gas flaring. As the energy industry strives to address infrastructure constraints and strengthen environmental standards for flaring and emissions, Crusoe is here to help,” source Crusoeenergy.

Lire: Oman inaugurates a second mining center in the country.

Benefits for oil companies

Oil companies can benefit from several benefits by getting involved in Bitcoin mining or using cryptocurrency-related initiatives. Here are some of these benefits:

Income diversification : Bitcoin mining offers oil companies an opportunity to diversify their sources of income. This can reduce their exclusive dependence on the oil sector and mitigate risks associated with oil price fluctuations. Having an additional Bitcoin mining business can provide a significant alternative source of income.

Valorization of surplus resources : Oil companies can use the excess resources they produce, such as associated natural gas, to power Bitcoin mining farms. Instead of wasting these resources by burning or flaring them, they can use them productively to generate electricity needed for Bitcoin mining. This helps maximize the use of energy resources and creates additional value from these otherwise wasted resources.

Brand image and environmental responsibility : Participating in Bitcoin mining can help oil companies improve their brand image by demonstrating their commitment to clean technology and innovation. By using excess resources to power mining operations, they can help reduce greenhouse gas emissions associated with flaring. This can be seen as a step towards greater environmental responsibility.

Of course, the benefits mentioned above may vary depending on each company's specific circumstances and market conditions.

The controversies aroused

Although mining Bitcoin from excess gas can have environmental and economic benefits, voices have been raised to denounce the practice. Some authors like Paasha Mahdavi, co-author of a paper on methane reduction measures, says that "projects designed to capture gas that would otherwise be flared or vented have led to an overall increase in gas production." As a result, some fear that the move will provide an incentive for oil companies to increase their oil production and contribute to increased greenhouse gas emissions.

According to The Guardian, this process is a "false solution" because it amounts to "putting a bandage on a gaping wound". It is stipulated that "simply finding other uses for "waste gases" does not address the urgent need to reduce fossil fuel consumption".

The Economist Alex de Vries, highlights the fact that despite the efforts made by bitcoin miners, the issue of electronic waste is not resolved, increasing drastically with mining operations.

Finally, the authors of the study " Approaches to Utilizing Flare Gases at Oil and Gas Fields " believe that the practice can be advantageous in several ways but requires a more in-depth multi-sectoral analysis to be able to conclude.

Final reflections

Bitcoin mining can offer an attractive solution for oil companies by allowing them to use excess gas to produce electricity and generate additional revenue. By reducing emissions of methane, a greenhouse gas potentially more harmful than carbon dioxide, this approach could help make the oil industry more sustainable and environmentally friendly.

From this perspective, Daniel Batten argues that bitcoin mining is a counterintuitive solution and can be beneficial for the environment. The alliance of the mining industry and bitcoin also demonstrates the efforts made to help make bitcoin a greener activity.

However, it is important to balance the economic and environmental benefits of Bitcoin mining to ensure a sustainable transition to a greener economy. It would seem that the work of ecologists pooled with experts from different industries could lead to the creation of ever more innovative solutions to make bitcoin mining an activity that also contributes to the fight against climate change.

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