The Russian government is considering a new project designed to mine Bitcoin using associated petroleum gas. The Deputy Minister of the Ministry of Industry and Trade in Russia, Vasiliy Shpak, filed a proposal with the country’s central bank and the Digital Development Ministry to use oil field equipment for mining Bitcoin.
This report was filed on September 7, according to a report published by Kommersant. Mr Shpak asks the government to provide feedback on the proposal initially presented to him by local gas and oil companies.
The companies proposed to use the associated gas to supply power to nearby data centres for Bitcoin mining.
Commonly referred to as associated gas, this type of natural gas is a byproduct of oil drilling. However, due to the high cost of ideal gas infrastructure, associated gas is often wasted through flaring. Some companies also burn off excess gas to avoid damage. This results in significant losses.
For that reason, the Russian government seeks to reduce gas flaring to cut down on emissions. While the government has put in measures to cut the emissions, it has struggled to meet set targets. This is mainly due to a lack of proper infrastructure.
Petroleum Gas for Bitcoin Mining
Using excessive gas for Bitcoin mining will significantly improve thermal generation of natural gas . This is through hybrid modules of digital currency extraction. In a letter, Shpak noted that using gas to mine Bitcoin would mean a better environment and revenue income. According to Kommersant, the planned project involves one of Russia’s most established oil companies. Gazprom Neft, the oil company in question, struggles to scale its cryptocurrency mining due to various regulatory uncertainties.
Being the third-largest oil company in Russia, Gazprom Neft is the only company in the project. Last year, Bitcoin generated 1.8 BTC in just a month.
This leading oil company is a property of the Russian government, which owns it under the Federal Agency for State Property Management. While Gazprom hasn’t yet responded to the claims, many believe it is the oil company the Russian government will work with.
Plan Backed By Politicians and Investors
Many politicians and entrepreneurs in the country billed Bitcoin mining as a reliable way of addressing the wasteful act of flaring associated gas. The same sentiments are shared by Ted Cruz, a member of the US Senate. He acknowledges that Bitcoin mining is an enormous opportunity for the oil-rich country to stop the wasteful act of flaring up gases.
As of today, Russia has the third-largest Bitcoin mining output in the world. This consists of over 11.2% of the monthly global production. The factors contributing to Russia’s strong Bitcoin mining capabilities include cheap electricity and the cold climate in the country. Most parts of Russia are icy, making it easier to mine Bitcoin.
However, Russian Bitcoin miners exempted from preferential electricity tariffs due to increased strains on electricity grills. This means they will pay more for electricity compared to ordinary households. The move wil make Bitcoin miners spend their money on the government.