The Volume of Mining in Oil Fields has Reached 85 MW in Russia

The Volume of Mining in Oil Fields has Reached 85 MW in Russia

Experts have estimated 85 MW of energy capacity for oil wells in Russia engaged in crypto farm mining. Investors are considering projects for another 200 MW despite constraints stemming from Western sanctions, a report reveals.

Annual Revenue from Crypto Mining Will Exceed One Billion Rubles

Analysts at Vygon Consulting, an independent consultancy working on the development of the Russian fuel and energy complex, have estimated a combined power rating of 85 megawatts, which is 23% of the market in data centers mining cryptocurrencies in the oil fields of Russia.

The crypto farms are supplied with electricity generated by small power plants burning associated petroleum gas (APG). Oil companies are required to dispose of the by-product of the extraction of black gold. While it costs them almost nothing, they can sell it to miners.

The Russian business daily Kommersant reported that Russian oil producers use around 17 billion cubic meters of APG annually to power facilities at the drilling sites. Researchers say cryptocurrency mining accounts for 279 million cubic meters of consumption at the moment, quoting the study conducted by Vygon Consulting.

In July alone, the earnings of APG miners amounted to 400 million rubles (approx. USD 6.6 million), calculated at a monthly average exchange rate of USD 20,000 per 1 BTC. Their projected annual revenue for July 2022-July 2023 at that bitcoin price is 4.8 billion rubles (close to USD 79 million), and the annual income for six years could reach 1.16 billion rubles (USD 19 million).

APG Coin Minting is Set to Expand

The APG mining industry could potentially see multifold growth, according to analysts. If 1.6% of the associated gas that is currently flared is used for mining, then the annual income of the miners would double to 2.5 billion rubles. And if a third of all flared APG is dedicated to mining, the sector could increase in size by 25 times and expect revenue of up to 30 billion rubles per annum.

Russia’s mining businesses are facing challenges due to sanctions imposed over the conflict in Ukraine. The EU has limited transactions with crypto wallets of Russian users, and some international crypto exchanges restrict Russians’ access to their platforms. Vygon Consulting recommends that a possible way out is to register a mining entity in another country.

But it is not always a feasible solution, as the case with Bitriver reveals. The Swiss-registered company, which is a major operator of mining data centers in the Russian Federation, was sanctioned by the U.S. Department of the Treasury in April, amid concerns that Moscow may use the minting of digital coins to monetize its energy resources.

In June, Russian crypto media reported that Bitriver has signed a memorandum of cooperation with Gazprom Neft, the oil production unit of Russia’s energy giant Gazprom, to utilize electricity generated from associated gas. Vygon Consulting’s experts insist such projects carry no risks for oil companies.

Gazprom Neft began launching pilot projects to establish data centers powered by APG in 2019 and now has computing infrastructure operating at its enterprises in three Russian regions. The company does not engage with digital currencies directly but provides the excess energy to the installations run by partners.

Importing computing equipment required for crypto mining is another problem for Russian companies facing international restrictions, the report notes. The path "has become longer legally and logistically," says Roman Zabuga, co-owner of BWC UG, another leading mining operator who puts the current installed capacity of APG farms at 30 to 40 MW. Nevertheless, he believes that investors plan to realize large-scale new projects with a combined capacity of 200 MW in the future.