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Most crypto enthusiasts know that Bitcoin has given birth to a global financial revolution. If that was not enough, this crypto asset has also sparked an uprising of innovative ideas that have revolutionized legacy industries such as banking, finance, technology, and many more. Now, this wave of revolutionary ideas has reached the petroleum industry, or the oil industry as most know it, and offers a solution to the age-old issue of gas flaring.
Let’s take a quick look at what gas flaring is and then discuss how Oil and Natural Gas Corporation (ONGC) can benefit from Bitcoin mining.
Gas Flaring and Woes of ONGC
Let’s start with why gas flaring is required and what it is.
The oil and gas industry regularly faces the challenge of tackling natural gas formations when they accidentally hit them while drilling for oil. While oil can be easily shipped out to remote locations via transport mediums, it is extremely difficult to ship natural gas through the same. For transporting natural gas, durable pipeline infrastructure is required.
Now, in the oil business, close pipeline infrastructure is required where the companies can quickly route the gas formations and sell them to any potential buyer who is ready to buy the gas immediately. However, in most cases, the pipelines are not close to the drilling location, and the drillers need to dispose of the gas quickly. So the companies flare it or burn it. This, along with transportation mishandling, power outages, usage of old equipment, and more, are common reasons why flaring is done.
Along with the reasons mentioned above, another key reason behind flaring is that natural gas is nothing but methane, which is reportedly 25% more potent than carbon dioxide in trapping heat. So, combusting the gas is a more sound option than directly releasing it into the atmosphere. But flaring is not always 100% successful, and some methane also tends to escape unburnt.
In India, ONGC has also faced similar situations in the past. Reportedly, ONGC flared Rs 1,021 crores worth of natural gas during 2012-13 to 2019-20, of which Rs 817 crores worth of gas was flared owing to avoidable reasons. This is both a sad wastage of crucial resources and an environmental hazard.
Energy Requirement in Bitcoin Mining
The gigantic requirement of energy resources for Bitcoin mining is a popularly known fact. In a September 2021 report by the New York Times, Bitcoin mining was estimated to consume 0.5% of the global energy consumption! Since Bitcoin is a digital network, it requires energy right from the time one wants to mine it, trade it or use it in a DeFi medium. Here, the share of Bitcoin mining in energy consumption is staggeringly high.
Bitcoin mining is a process where users on the Bitcoin network compete to solve a numerical problem. The winner gets the opportunity to add their block of transactions to the Bitcoin network. For this, the miner is rewarded a predefined number of Bitcoin units, and this is the only method from which new bitcoins are added to the network. Miners invest in state-of-the-art ASICs and other high computational technology to amplify their chances of solving the numerical problem first. Goes without saying that these electronic devices consume staggering amounts of electricity, equivalent to 9 years worth of electricity required by a household in the US, as estimated in the earlier quoted report by the New York Times.
Unfortunately, these energy requirements are bound to increase in the future as Bitcoin is gaining more popularity globally. The Bitcoin protocols are set in such a way that an increase in the number of miners will directly lead to an increase in the complexity of the numerical problems. This further leads to higher computational requirements and more energy requirements.
Here’s the solution
Unfortunately, gas flaring is an activity that companies take up to prevent methane from directly escaping into the environment. The companies also understand that by doing this, they are burning millions of dollars which they could have easily made if a quick and reliable buyer had been available with an optimum infrastructure nearby where gas stash could be quickly diverted to their facility. This is where Bitcoin mining comes into play.
Companies focused on Bitcoin mining come up as potential customers that can help the gas companies to sell natural gas on-site. The Bitcoin mining companies can set up their facilities nearby, which will avoid setting up an infrastructure of long pipelines to transport gas.
ONGC can also work towards a solution like this. This is already gaining popularity around the world. – Let’s look at a few cases.
The world is Adopting this
The unity between the oil and gas industry and Bitcoin mining proponents is taking place around the world. And why not? The gas companies have the chance to benefit from this partnership economically and avoid a situation where earlier they made nothing.
Let’s look at some examples:
- Crusoe Energy is working with gas companies in North Dakota and Montana, USA.
- Vekus is working with Gazprom Neft, to channel the gas supply from the latter to establish a mining farm in Russia.
- Giga is using the gas from the Texas fields which would have been flared to instead mine Bitcoin in the USA.
And this is just the start of this gas revolution in Bitcoin mining. Now, ONGC has an opportunity to tap into this field and become a pioneer in this upcoming sector in the country.
A Multi Progressive Step
In a developing market like India, energy dependence on natural fuels is already a serious problem. Here, an optimal plan is required so that unfortunate event like wasting Rs. 1021 crores worth of natural gas can be avoided in the future.
Bitcoin mining presents itself as a more than worthy as well as an environmentally sound alternative to gas flaring. This is also in line with the growing crypto culture in the country, where the next obvious step is embracing one of the most traditional facets of Bitcoin, which is mining. As discussed above, ONGC can make millions out of the collaboration with mining companies, and that too at an activity that has generated no profits in the past but has invited sums of hefty fines.
Let’s also not forget that with the onset of this collaboration, an ecosystem of dignified employment opportunities will also prevail. All the more reasons for the Indian Oil industry and Bitcoin mining corporations to join hands together.Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.