Kazakhstan Proposes Using Flared Oil Field Gas to Power Crypto Mining

Kazakhstan is looking at a creative way to solve one of the biggest problems for its crypto-mining industry: access to electricity.

The country wants to turn leftover gas from oil fields into electricity for crypto mining, creating a new power source that wouldn’t put extra pressure on the national grid.

Under this new setup, oil companies would hand over associated petroleum gas (a byproduct of drilling that’s usually just burned off) to crypto miners. Miners would put their gear right at or next to the oil fields, turn the gas into electricity, and use that to power their rigs.

The Blockchain and Digital Mining Association of Kazakhstan estimates that the country’s flared gas might produce somewhere between 1.2 and 1.3 terawatt-hours (TWh) of electricity. According to Kazakhstan’s Ministry of Energy, as many as 60 oil fields could get involved.

Kazakhstan’s Energy Shortages

The idea is particularly relevant because Kazakhstan has had a hard time balancing its growing power needs with what crypto miners require.

After China cracked down on mining in 2021, Kazakhstan became one of the biggest Bitcoin-mining spots in the world. However, the sudden rush of miners led to power shortages and put pressure on an outdated energy system.

Following that, the government tightened its grip on how much power miners may get. The International Monetary Fund has noted before that energy shortages pushed Kazakhstan to hike electricity prices for miners and add new mining taxes.

As such, by using associated gas, mining companies could avoid competing directly with homes and other businesses for power from the grid.

It might also give oil producers another way to make money from gas they’d otherwise have to manage or burn off. Kazakhstan’s current subsoil laws limit gas flaring and require oil and gas companies to find ways to use and process associated gas.

The government is now working on making the specific rules and legal framework for this new model. Because of that, the estimated 1.2 to 1.3 TWh should be looked at as potential room to grow rather than an instant boost to the country’s mining power.

How fast this rolls out will depend on infrastructure spending, natural gas supplies, market costs, and regulatory approvals.

Related: Kazakhstan Tightens Crypto Mining Rules to Support State Reserve