Mining Bitcoin is turning out to be a profitable enterprise for Canadian oil companies, who have started to use the excess natural gas from their drilling operations to generate electricity. In crypto mining, the difference between profit and loss is largely determined by the cost of electricity, hence why so many miners are located in China where electricity is cheap. Since oil companies are generating essentially free power, Bitcoin mining makes a lot of sense for them.
Free Energy for Mining
Natural gas is a by product of drilling for oil. Traditionally natural gas is sold, but due to low natural gas prices and high transportation costs, some oil companies have found that they can no longer profitably market this fuel. As a result, many drilling companies have been burning it off (flaring) without using it for anything. That’s changing now though.
Stephen Barbour is an oil industry consultant and he was the first to come up with the idea of using the excess natural gas to mine Bitcoin. He recognized that even though the price of Bitcoin is down more than 80% from its peak, it still makes sense to mine Bitcoin since the electricity is essentially free. The mining rigs they use are built into steel shipping containers which makes them easy to transport to even the most remote locations.
How Mining Bitcoin Keeps the Oil Wells Open
Not only does Bitcoin mining allow oil companies to generate a profit on an unsellable commodity, it’s actually letting them drill for more oil. The difficulty with burning off natural gas is that there are government imposed limitations on flaring. Once the legal limit is reached the oil company has to find an alternative outlet for the gas or stop drilling. By using that gas to generate electricity they can continue mining without having to build expensive pipelines or shut down their operations entirely.
While Canadian companies might be first-to-market with a Bitcoin mining solution, it’s possible that oil fields across north America are going to follow in their footsteps. There are companies selling portable Bitcoin mining rigs and if these can be adapted to run on natural gas and sold en masse, they’ll likely find a high demand from oil companies looking to increase their profits and keep their wells open.