Russian Authorities Consider Proposed Crypto Mining Project Using Associated Petroleum Gas

The Russian government is considering a proposed project to mine crypto using Associated Petroleum Gas (APG).

Local oil and gas companies in Russia want to operate crypto mining farms on their oil rigs using APG to generate power. Deputy head of Russia’s Ministry of Industry and Trade, Vasiliy Shpak, presented the proposal to the Ministry of Digitalization and the Bank of Russia. According to a report by Kommersant, he filed the proposal on Wednesday, September 7, asking the officials to clarify their positions on the matter.

Experts say that the project may be of interest to foreign investors primarily from China, where mining is prohibited.

In Russia, however, the law regulating the circulation of digital currencies has not yet been adopted.

The Crypto Mining Proposal
The Ministry of Industry and Trade told Kommersant that the initiative came from market participants – local oil and gas companies.
The firms specifically proposed to use associated gas to power nearby data centers for mining crypto. This type of natural gas -flare gas, is a byproduct of oil extraction. It is a liability for oil-drilling companies. Additionally, it releases carbon dioxide into the atmosphere. But due to the high cost of proper gas infrastructure, it is often wasted through flaring, where the excess gas is burnt.

Total crypto market at $2.6 Trillion | Source: Crypto Total Market Cap from TradingView.com

Shpak’s letter also suggests that the country starts manufacturing devices for turning flare gas into energy, Kommersant wrote. The Russian government has reportedly attempted to reduce gas flaring to cut emissions. However, it has struggled to meet targets due to a lack of necessary infrastructure.

In his proposal, Shpak noted that using the gas for crypto mining could potentially improve the efficiency of natural gas usage in thermal generation through “hybrid modules of digital currency extraction,”

A source close to the Ministry of Industry and Trade said that the proposal actually came from “one of the large Russian oil companies,”. The company already has a small mining farm using flare gas but would like to scale up its crypto mining project. But because the mining business is in a legally gray zone, the company fears a negative reaction from the Central Bank. So it turned to the Ministry, who can discuss the risks with the regulator.

The only Russian oil company to publicly launch a mining farm is Gazprom Neft, the third-largest oil producer in Russia. Its partner Vekus mined 1.8 BTC in just one month last year, according to Russian crypto news outlet Forklog. Gazprom Neft itself declined to comment.

Authorities Respond
The Russian Central Bank spoke to Kommersant about the proposal. The law on “digital financial assets” introduces the concept of digital currency. But it stipulates that the procedure for its circulation should be regulated by separate laws.
He also said that there is an ongoing discussion about approaches to regulation.
The Ministry of Digital Affairs did not respond to the request.