Bitcoin mining: The best ally for the oil and gas industry
The oil and gas industry has always been a target for environmental backlash. Because of inefficiencies in the extraction process, hazardous wastes are released into the atmosphere. For decades, this has been one of the most pressing challenges in this industry. But now, thanks to Bitcoin mining, we might have just found a solution.
The significance of the oil and gas industry
Although progressively moving to more renewable alternatives, the oil and gas industry is still the main source of energy and fuels of the planet. In the United States alone, energy from this source makes up ~41% of the total power supply.
With most modern industrial facilities relying on petroleum, the commodity is essential on a global scale. Data from the World Bank estimates that ~1.3% of the global economy comprises oil rents. As you can see, this industry not only is a significant source of income but also enables other sectors — namely vehicles, transportation, heating, asphalt, and electricity — to function and grow.
However, oil production is concentrated in a few countries. The United States, Suadi Arabia, and Russia alone produce ~42% of the world’s oil, and the top ten producing countries, including these last three, are accountable for ~72% of it. This situation leads to the need for distribution infrastructure. But handling this kind of resource often suffers from inefficiencies, and a considerable amount of material is wasted, generating both losses and environmental pollution. This is especially the case of one particular process: Natural gas venting.
Natural gas venting, methane flaring, and the need for a solution
Methane is a frequent byproduct obtained from the oil extraction process. It is the principal constituent of natural gas and a relatively abundant fuel. But it’s challenging to capture and store and considerably harmful for the environment.
Besides the lost amount through leaks, cracks, and other infrastructure malfunctions, methane is also purposefully released into the air through a process called natural gas venting. Jason Les, CEO of Riot Blockchain, explained this during the last Bitcoin Mining Council meeting: “[Methane] is useful if it can be transported through a pipeline, but if it cannot, that methane is vented into the atmosphere.” Here we’ve got the first significant inefficiency since, as we said before, Methane is a cheap energy source. Oil and gas producers have to release it because they’ve got no other choice. But if there were an accessible market and proper distribution infrastructure, these companies could sell cheap methane to other energy-consuming industries.
As Les puts it: “Bitcoin mining is entirely agnostic to locations. Miners can operate anywhere they’re getting power and internet.” But not only Bitcoin miners get a benefit out of this. They solve a problem for oil fields, which have to deal with environmental concerns, regulation, and criticism. It’s an authentic, mutual benefit, win-win situation.
There is a less polluting alternative to natural gas venting when capturing and storing methane becomes too expensive and cumbersome to be sustainable: flaring. “To mitigate pure methane venting, these fields will go through a process called flaring to burn the methane.” clarified Les. “That produces CO2 as a byproduct, which is not as bad as pure methane.” Nevertheless, flaring is not entirely efficient, as a meaningful amount of methane still escapes into the atmosphere. Plus, although less polluting, CO2 is still harmful to the environment. Again, although more environmentally responsible, this alternative is less than ideal. It still harms the environment considerably and wastes resources that could otherwise be turned into energy and reduce pollution.
How Bitcoin mining recycles toxic waste into wealth
Oil and gas companies have suffered — and continue to do so — intense pressure due to their methane treatment. They face rigorous regulations and exorbitant emission penalty fees, besides being unable to capitalize the full value of their extraction processes. Now, after many decades, they might have found the most efficient solution.
Enter Bitcoin. The most efficient, decentralized, and versatile monetary system in history. One significant advantage of this network is its proof-of-work algorithm, which allows miners to provide security and stability to the network from anywhere with power and an internet connection.
Thanks to Bitcoin and mining, oil and gas companies don’t have to rely on expensive, complicated procedures and infrastructure to capture, store, and redistribute methane. It’s enough to install power generators and converters on their facilities and redirect methane to them to start mining on-site.
With Bitcoin mining, the oil and gas industry not only has an efficient way to treat their toxic wastes but also to do so while generating revenue in BTC, whether that is by selling methane to neighboring Bitcoin miners or by mining themselves.
Challenges for on-site Bitcoin mining
We’ve established that on-site methane mining is highly energy-efficient and environmental-friendly because it captures toxic waste and turns it into electricity. However, is it as efficient financially speaking?
In the situation we described above, Bitcoin mining is a secondary activity for oil extraction sites. Think of it as a side-operation to avoid legal issues, improve performance, and even make revenue in return. Oil and gas extraction and processing is still the priority, though, and as such, managers may want to reinvest their mining revenue in their principal activity. Here’s where they may find a little friction.
First of all, they would face exposure to volatility. If they’re caught in the middle of a bear market, for example, they may have to sell their mined coins at a lower price, losing profits. Secondly, they may also be vulnerable to difficulty adjustments, which would affect their revenue and also generate uncertainty regarding their mining performance.
On the other hand, managing mining equipment is a cumbersome task, especially when you have a good amount of them. Even more so if you also have to focus on a colossal power plant at the same time.
Titan’s solution for greater efficiency: Hashrate distribution
Although not a big deal, these factors may pose an inconvenience for oil and gas companies who want to take up mining. But what if there was a way to hedge against these unavoidable Bitcoin issues? That is precisely what Titan is building.
The Titan protocol is a network powered by smart contracts and blockchain technology designed to tokenize, trade, and redirect hashrate effectively. Through it, instead of mining Bitcoin, miners can sell their computing power to the highest bidder and automatically earn profits for it without having to sell the coins themselves. In turn, buyers could take complete control of that hashrate, redirecting to the mining pool of their preference or simply using it to mine individually.
Furthermore, Titan is also building practical, user-friendly software to make managing mining hardware and operations a lot easier, faster, and straightforward.
Combining the protocol and the software, oil and gas companies — and energy producers in general who decide to mine Bitcoin — can focus on their primary activity and rest easy without worrying about difficulty, hashrate, or price.
Are you interested? Do you have any questions? Make sure you visit Titan.io to find out more.
Titan is actively working to optimize mining and make proof-of-work cryptocurrencies more accessible and democratic. If you liked this story, make sure to subscribe to our blog and sign up for our weekly newsletter. You can also visit our social media through the links below. We’ll be glad to have you!