Bitcoin mining & ESG: Why digital transformation can enhance visibility and transparency.
Bitcoin mining has converged with the energy sector at a rapid pace, yielding an explosion of innovation in the name of ESG. Here is what it means for the oilfield going forward.
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The past few months have seen headlines that reinforce creativity and innovation within the energy industry, all in the name of Environmental, Social, and Governance (ESG).
First, there is Bitcoin. While it is not a new phenomenon, Bitcoin’s popularity is driven by a larger acceptance of cryptocurrency and that more companies are accepting it as a form of alternative currency in transactions. Bitcoin also has been driven by the outspoken voice of billionaire Elon Musk. However, mining Bitcoin requires using a lot of energy and the size and scale of mining operations have grown over the years. It is estimated that mining one Bitcoin transaction takes 1544 kWh to complete. That is equivalent to 53 days of average power for a US household. Supermajors like ExxonMobil have even entered the cryptocurrency mining trend with the expansion of an initial pilot to use flare gas at oil drilling sites globally to power servers and supercomputers, according to media reports.
Second, the upstream drilling of crude oil produces an excess byproduct — natural gas — which is often flared or vented due to a lack of pipeline infrastructure. According to the US Energy Information Administration (EIA), the volume of natural gas vented and flared reached 1.48 Bcf/day in 2019, with 85% of those emissions coming from the Bakken play in North Dakota and the Permian Basin in West Texas. Flare gas is harmful to the environment since it is released into the atmosphere. For years, the energy industry has focused on flaring this byproduct since it was not economically feasible to store and ship it to a destination.
The new and interesting juxtaposition is the intersection of using flare gas as a fuel to drive Bitcoin mining operations. Economics typically serves as a stimulus to jumpstart innovation. The ingenuity of the industry allows harmful waste (flare gas) to be recycled fuel for Bitcoin mining. According to Bloomberg, Exxon has expanded an initial pilot to use flare gas at oil drilling sites to power servers for mining Bitcoin.
Fossil-based energy companies are getting positive headlines and credit in the eyes of consumers and investors for channeling the waste into something useful, or at least productive. According to Crusoe Energy Systems, one of the largest Bitcoin miners in the US, its process reduces CO2e emissions by 63% compared to regular flaring. With oil companies facing mounting pressure from governments and agencies to reduce their greenhouse gas (GHG) emissions, one could assume that it makes sense, both environmentally and economically, for an oil and gas producer to link up with a Bitcoin miner and supply it with stranded or otherwise flared natural gas to comply with ESG initiatives.
But pilot projects performed in a vacuum cannot truly be gauged for effectiveness. The data gathered from the conversion of flare gas to fuel provides keen insight into managing this aspect of ESG. The valuable lesson here points to the adage, ‘if you can measure it, you can manage it.’
This is why integrating digital transformation technologies is critical within the upstream industry to measure gas flaring. While any number of measurement devices exist to measure gas flaring, the power comes in an integrated dashboard to show the offsetting benefit of fuel usage. Once baselines are taken and calculated, these offsets can then be calculated when the natural gas is recycled and used as fuel. It is this visibility and transparency that is so critical to helping investors and the public gain confidence in knowing how the opportunity of ESG is being addressed within the upstream oil and gas industry.