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Excess natural gas that would have been burned off -- or "flared" -- due to lack of pipelines is being put to use for crypto miners.
Key points
- Bloomberg reported Thursday on a pilot project that Exxon Mobil is testing to use extra natural gas it produces and can't ship as a source to generate electricity for energy-hungry crypto miners needing power to run proof-of-work (PoW) data centers.
- Miners for PoW cryptos such as Bitcoin, Ethereum, Dogecoin and others require a lot of electricity to run computer servers used to solve complex codes needed to verify blockchain transactions -- unlocking or "mining" crypto as reward for the miners' efforts.
- Energy producers have to burn off some of their natural gas due to lack of pipelines, wasting the excess fuel and releasing it directly into the environment without any benefit.
- This pilot project is looking to change that.
According to a Bloomberg article published yesterday, U.S.-based energy company Exxon Mobil is conducting a test project to use extra natural gas it produces and can't ship as a source to generate electricity for energy-hungry cryptocurrency miners. Miners for proof-of-work (PoW) cryptos such as Bitcoin, Ethereum, Dogecoin and others require a lot of electricity to run and cool computer servers used to solve complex codes. Solving those codes are what validate blockchain transactions to keep each blockchain up and running.
Using Bitcoin as an example, the first miner with the correct code for a transaction is rewarded with some of the 21 million Bitcoin that were locked into the original Bitcoin software. Crypto mining is a little like unlocking a new level or reward in a video game after completing an in-game challenge.
Regardless, it takes a lot of energy to accomplish that crypto mining and PoW cryptos have been bashed for being bad for the environment. However, this Exxon Mobil beta test could change that negative narrative while helping do the same for big energy in a profitable and efficient way.
Details of converting wasted natural gas into crypto
The article states that Exxon Mobil has signed an agreement with Crusoe Energy to use the extra natural gas from oil wells in North Dakota to power nearby Bitcoin mining operations. The crypto initiative reportedly requires 18 million cubic feet of natural gas each month, which is half a percent of Exxon's daily production volume in that state.
The North Dakota program began in January 2021 and could be expanded to Alaska, as well as outside the U.S. in Germany, Guyana, Argentina, and Nigeria according to the article.
Using "flared" natural gas to mine crypto is eco-friendly
From the crypto miners' perspective, electricity generated by natural gas produces roughly half the greenhouse gas emissions that it takes to produce the same amount of electric power using coal.
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For the energy producer, moving natural gas requires pipelines which cannot always safely accommodate the total amount of the supply they capture. This pipeline shortage frequently forces them to burn off -- or "flare" -- the excess gas or vent it into the air. That waste hurts both the environment and the producer's profits.
Gas and oil companies are increasingly under pressure from investors, regulators, and eco-friendly advocates to shrink their carbon footprint to lower negative climate effects. Reducing flared gas waste is a step in that direction. While the fuel is still burned as part of this crypto project, it replaces the usual fuel that the crypto-mining operation would have used otherwise.
Additionally, the excess fuel is likely sold at a discount to the crypto entrepreneurs, which is still profitable to the energy producer because the wasted natural gas was always a financial loss until now.
While this is not a complete answer to all complex environmental issues, it is an elegant example of an innovative solution that deserves additional consideration and exploration.
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https://www.fool.com/the-ascent/cryptocurrency/articles/bitcoin-miners-fueled-by-exxon-mobil-natural-gas-waste/
2022-03-25 16:08:20Z
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