On January 21, 2016, when the sun set outside Watford, North Dakota, the natural gas on the oil well pad burned. REUTERS/Andrew Cullen

May 21 (Reuters)-On an oil field extending along the Rocky Mountains and Great Plains in the United States, a trailer is hung on a truck and drove to the well site to collect natural gas and convert it into electricity on the spot.

Trailers-carrying pipelines, generators and computers-are called "mining equipment". But their master is not here to drill for oil. They are using stray natural gas that oil companies don’t need to push them to find another treasure: cryptocurrencies like Bitcoin.

Cryptocurrency is virtual currency exchanged without an intermediary (such as a central bank) for the purchase of goods and services. However, extracting money from cyberspace requires a lot of electricity, which is usually expensive. Supercomputers must constantly compete with other "miners" to solve complex mathematical problems in order to unlock the digital vault that holds the currency.

Cryptocurrency miners say these supercomputers are placed in mobile trailers and run at temperatures up to 160 degrees Fahrenheit (71 degrees Celsius), while in the cold regions of western North Dakota, people can stay warm by sitting nearby.

Miners are increasingly sending these rigs to oil fields because it is one of the cheapest ways to obtain the energy they need. Oil and natural gas come from the same well, but in these locations, drillers are looking for crude oil, and there are no pipelines to bring natural gas to the market. This usually forces them to burn it in a process called combustion-producing carbon dioxide emissions-or emit it directly into the atmosphere as methane.

Steve Degenfelder, land manager of Kirkwood Oil and Gas LLC, a Wyoming producer, said: “For us, the best option is stranded, small amounts of natural gas, which cannot justify the pipeline. The company has formed an alliance with Bitcoin miners. ."

Oil companies are facing pressure from investors and government officials to reduce emissions that contribute to global warming. Sometimes they provide natural gas to cryptocurrency miners for free; other times they sell it.

“Oil and gas companies don’t like to burn their natural gas-that’s burning money,” said Degenfelder, who worked with miners connected to Chicago energy and technology company EZ Blockchain to reduce its 600 wells across the Rocky Mountains. .

Some environmental advocates and investors say that cryptocurrency is not a long-term solution to undesired natural gas emissions, because the future of the currency is highly uncertain, and Bitcoin and other cryptocurrency companies generate their own emissions.

The overall carbon dioxide emissions of the global Bitcoin industry have risen to 60 million tons, which is equivalent to the exhaust of about 9 million cars. According to a March report by Bank of America analysts, this is an increase from 20 million tons two years ago.

Billionaire Elon Musk said on Twitter that his electric car company, Tesla, will no longer use virtual currency as a payment method, citing the "rapid increase in the use of fossil fuels in Bitcoin mining and transactions." , The value of Bitcoin, the most famous cryptocurrency, plummeted from historical highs. . "The value of the currency plummeted in two weeks before the recovery began on Thursday.

Andrew Logan, senior director of oil and gas at Ceres, a Boston-based clean energy investment group, said there are better ways to use stranded natural gas, including powering hospitals and schools. However, he said that this requires the construction of pipelines to transport products out of the oil field.

"I think we need a more durable and long-term solution to truly bring natural gas to the market and let it be used for any supreme purpose," he said.

Proponents say that the new oil-cryptocurrency alliance in North America has shifted the mining of virtual currencies from Asia to Asia. More than 60% of such businesses in Asia rely mainly on coal power. The carbon dioxide produced by coal combustion is approximately twice that of natural gas.

Mark Le Dain, vice president of strategy at Valdere Technologies, an oil and gas software company, said: "It helps reduce emissions at the (oil) producer level, and it also helps by reducing mining in parts of the world that may be powered by coal. To reduce global emissions." Inc, tracking energy molecules and their use.

However, environmental advocates and some investors point out that harmful emissions have not disappeared-they will move from one industry to another.

"It's not that you are eliminating emissions, but that you are turning them into something else, Bitcoin," Logan said.

Despite the challenges facing the cryptocurrency market, Bitcoin's appeal to miners still exists. According to data from Refinitiv Eikon, even after the recent price collapse, the value of a single bitcoin on Thursday exceeded $40,000—almost 90 times the value of five years ago.

Some cryptocurrency mining companies say that the liquidity of their natural gas-fueled businesses is key, which allows them the flexibility to extract natural gas from different locations.

"The idea that you can plug in these (computers) and take them elsewhere really caught my imagination," said Haley Thomson, a former electricity trader and president of the new cryptocurrency mining company Imperium Digital.

Various business models have emerged. In some cases, cryptocurrency miners use all or part of the coins they mine to pay oil companies for gas. In Kirkwood's case, EZ Blockchain used stranded natural gas to make bitcoins and handed them all to Kirkwood. EZ Blockchain makes money by providing equipment and mining services for a fee.

Industry experts and scholars who study energy use say that there are fewer than 10 large Bitcoin mining companies using stranded natural gas in North America. Many cryptocurrency miners operate smaller businesses in the United States and Canada-some of which are powered by a well.

But some large oil companies have already signed contracts.

A company spokesperson confirmed to Reuters that in North Dakota, the largest oil producing state, Norway’s Equinor ASA (EQNR.OL) and Canada’s Enerplus Corp (ERF.TO) are using this type of mining to reduce combustion.

Crusoe Energy Systems Inc, based in Denver, is one of the largest Bitcoin mining companies on the African continent and uses natural gas that has been stranded in other ways. Co-founder and former oil and gas engineer Cully Cavness said it expects to double its current 55 employees this year.

Crusoe has approximately 40 mobile containers in the oil shale basin. It plans to increase this number to 100 after it received $128 million in financing from investors including the Chicago company Valor Equity Partners LP and Lowcarbon Capital last month.

Crusoe’s partners include Kraken Oil & Gas Partners LLC, which produces approximately 10,000 barrels of oil a day, making the company the largest oil producer in Montana.

"We will need more people," Cavness said.

At the same time, government regulations and incentives that may benefit oil and cryptocurrency companies will soon be introduced.

The US Senate passed a measure in April to reverse former President Donald Trump's weakening of methane emission regulations. Academic experts said that this may promote the use of Bitcoin mining to reduce burning. Legislators in Texas and New Mexico are also seeking to combat emissions.

North Dakota and Wyoming passed laws this year to provide tax breaks for oil producers who provide natural gas to cryptocurrency and other data miners, otherwise these oil producers will be burned.

"I think this will be an important part of our vision for the future of North Dakota," said state Senator Del Patten, author of the North Dakota bill.

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