Russian Oil Companies Want to Mine Crypto on Flare Gas: Report

Russia’s Ministry of Digitalization and the Bank of Russia have been asked for official comments on the idea that oil companies might open mining farms on their oil rigs, using flare gas to generate power.

Vasily Shpak, the deputy head of Russia’s Ministry of Industry and Trade, asked the agencies to clarify their positions on the matter, Russian newspaper Kommersant wrote on Wednesday.

The Ministry of Industrial Development told Kommersant that the idea came from the oil and gas companies themselves. They suggested getting regulatory approval to mine crypto using flare gas for electricity generation. Shpak’s letter also suggests that Russia starts manufacturing devices for turning flare gas into energy, Kommersant wrote.

Flare gas is a byproduct of oil extraction and is usually burnt, which is a liability for oil-extracting companies and releases carbon dioxide into the atmosphere.

The idea to seek approval came from one of the country’s major oil and gas companies, which already has a small mining farm using flare gas, but wants to expand it, an unidentified source “close to the Ministry of Industry and Trade” told Kommersant. Russian law, however, currently doesn’t regulate mining business.

The only Russian oil company to publicly launch a mining farm is Gazpromneft. In December 2020, the company said it was starting a pilot mining venue on one of its oil fields in Siberia, CoinDesk wrote.

At the time, a Gazpromneft representative told CoinDesk that the company wasn’t planning to mine crypto for its own reserves, but would provide a venue for other miners. Mining firm Vekus became its first client and mined 1.8 BTC using 49,500 cubic meters of gas during one month last fall, according to Russian crypto news outlet Forklog.

Last summer, Russia passed a law classifying cryptocurrencies as a taxable property. It did not, however, explain any practical matters related to crypto, as to how crypto businesses should operate in Russia or how people are supposed to declare and pay crypto-related taxes. These issues still have to be clarified by the future laws.