Key Takeaways:
- 85 MW, or 23% of the market, is the energy capacity of farms used for crypto extraction in Russian Federation oil fields.
- Market participants report that investors are already evaluating additional 200 MW projects.
- Western sanctions, however, are limiting the growth of mining in the Russian Federation.
The combined power rating of cryptocurrency mining data centers in Russia’s oil fields is 85 MW, or 23% of the market, as per analysts at Vygon Consulting, an independent consultancy focusing on the growth of the Russian fuel and energy complex.
These cryptocurrency farms receive their electricity from small energy plants that burn associated petroleum gasoline (APG), a byproduct of the extraction of “black gold,” which oil companies are required to discard. They might be able to sell it to miners even though it costs them almost nothing.
Around 17 billion cubic meters of APG are used annually by Russian oil producers to power infrastructure at drilling sites. According to researchers, 279 million cubic meters are currently consumed by bitcoin mining.
In reality, related gas is a by-product for oil corporations that are required by law to be disposed of. One method is to produce energy using APG.
A novel and highly profitable approach to using associated gas are to sell some of the energy to cryptocurrency farms, as it avoids the need to build a gas transportation infrastructure to provide APG to gas processing facilities.
APG miners made 400 million rubles ($6.6 million) in profits in July alone, based on an average monthly exchange rate of $20,000 for each bitcoin. At the price of bitcoin, their estimated yearly revenue for July 2022 to July 2023 is 4.8 billion rubles (about $79 million), and their estimated annual income for a six-year period may be 1.16 billion rubles ($19 million).
However, sanctions may pose issues for Russia’s mining growth. For instance, the EU already prohibits transactions with Russian users’ cryptocurrency wallets, and foreign crypto exchanges impose access limitations on Russians out of concern for secondary sanctions.
Companies nevertheless manage to discover a workaround, according to researchers at Vygon Consulting, the owner of a bitcoin mining farm can enroll in another nation.
However, That’s not always a practical option. For instance, when cryptocurrency exchange BitMEX imposed stricter requirements on Russian users, after July 11, 2022, Russian citizens and residents were unable to use BitMEX services from the European Union.
According to the firm, Gazprom Neft started undertaking experimental projects to develop digital hubs for energy-intensive computing based on energy from APG back in 2019-2020.
Currently, three of the company’s firms have the such infrastructure in place. The use of digital currency is not part of Gazprom Neft’s business plan.
Another issue Russian businesses facing international restrictions face is importing the computing equipment needed for cryptocurrency mining, the research states.
According to Roman Zabuga, co-owner of BWC UG, another major mining operator, the present installed capacity of APG farms is between 30 and 40 MW, and the route “has grown longer legally and logistically.”
