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Gazprom Neft Mines Bitcoin as an Alternative to Flaring Unwanted Gas

Electricity produced from flare gas may be inefficient as far as the grid goes, but powering bitcoin mining farms may be another matter.

Russia’s state-owned oil major Gazprom Neft has reported a successful pilot test using associated gas that would otherwise be flared to produce electricity for mining cryptocurrency at one of its Siberian drilling sites.

Media sites covering the cryptocurrency industry reported that a small Russian mining operation called Vekus is the first to leverage the power of Gazprom Neft’s unwanted gas and now the Russian major wants to expand the project.

Russia places first among gas-flaring nations followed by Iraq, the US, and Iran, which together accounted for 45% of global gas flaring from 2017–2019, according to the United Nation’s 2020 Global Gas Flaring Tracker report released in July.

Flaring leads to the release of a significant amount of greenhouse gas into the atmosphere, but from an industrial perspective to do anything else makes no commercial sense. The advent of cryptocurrency mining may change things however.

“The lion’s share of the cost of mining is electricity costs,” Vekus CFO Yuri Kudryashlov told Bitcoin.com. “For this reason, Vekus is constantly looking for reliable sources of cheap electricity. We gladly responded to the proposal of Gazprom Neft to organize a pilot project at one of the fields.”

Vekus placed a shipping container housing 150 units of Bitmain’s Antminer S9 ASICs on the site, and in 1 month the machines mined 1.8 bitcoin using 49,500 cubic meters of gas, according to a Gazprom Neft statement that appeared in the Russian crypto news outlet Forklog.

The test occurred at a drilling site in Khanty-Mansiysk where Gazprom Neft also has its own electricity-generating plant.

Gazprom Neft plans to expand the mining farm and get more clients’ ASICs, as well as more contractors like Vekus, which works similarly to North American mining operations such as Greenidge Generation, Crusoe Energy Systems, EZ Blockchain, and Upstream Data.

Furthermore, Gazprom Neft is not alone. In late 2020, Rosatom State Atomic Energy Corporation opened a mining farm near the Kalinin nuclear plant in Udomlya, 200 miles northwest of Moscow.

Also, the Russian aluminum and energy giant, En+ Group, created a joint venture (JV) with BitRiver, owner of the largest crypto mining venue in Russia, according to dailyalts.com.

This new JV, called Bit+, will not do any of its own mining. Rather it will offer services to crypto mining customers, following a business model similar to that of Gazprom Neft and Rosatom.

BitRiver already hosts about 100 megawatts (MW) worth of clients’ ASICs on a farm near the Bratsk hydropower plant, dailyalts.com reported. Meanwhile, En+ owns four hydropower plants in Siberia.

“Our energy assets in the region produce low-carbon, inexpensive electricity from renewable sources, and we are able to offer surplus energy to these partnerships,” Mikhail Khardikov, head of En+ Group’s energy business, was quoted as saying.

Rosatom plans to eventually open 240 MW or more of its power from several locations to the cryptocurrency industry. To put that in perspective, Chinese mining giant Bitmain is building a facility (to be considered among the world’s largest) in Rockdale, Texas. It will start with a capacity of 25 to 50 MW and later expand to 300 MW.

Gazprom Neft Mines Bitcoin as an Alternative to Flaring Unwanted Gas

Pat Davis Szymczak, Contributing Editor

13 January 2021

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