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Oct 22, 2021
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Oil state corporations mining beguiled

Oil state corporations mining beguiled

Photo: photoalliance / Geisler-Photop / TASS

Russian oilmen want to make money from mining. The Ministry of Industry and Trade, the Ministry of Digital Industry and the Bank of Russia (Central Bank) are already discussing a project of Russian oil companies to extract cryptocurrency from their fields.

In Russia, the law regulating the procedure for the circulation of digital currencies has not yet been adopted. Therefore, oil companies are probing crypto prospects through the Ministry of Industry and Trade. This ministry sent a letter to the Ministry of Digital Science and the Central Bank asking them to give their feedback on the possibility of using Russian equipment in oil fields for mining cryptocurrency, Kommersant reports, which obtained the text of the message.

We are talking about the use of associated petroleum gas (APG) for power generation. It will go to nearby data processing centers (DPCs), at the facilities of which, in turn, oil workers will be able to “extract” cryptocurrency. The Ministry of Industry and Trade asks the Central Bank to inform whether such an idea is legitimate.

The main argument of this is that the mechanism should increase the efficiency of using natural gas in thermal generation through hybrid modules for the “extraction” of digital currencies, the letter says. To implement the project, it is planned to organize in Russia the production of corresponding power plants with the possibility of subsequent export.

Oilmen will be able to earn money on cryptocurrency mining, and the state believes expert of the Financial University under the Government of the Russian Federation and the National Energy Security Fund Igor Yushkov:

– Oil workers openly say what they are afraid of – cryptocurrencies are not prohibited in Russia, but on the other hand, it is not clear how the state looks at it. This is a regulatory issue. Therefore, oilmen would better ask again, because for them, cryptocurrency mining is not the main thing. If it somehow interferes with the main business, then it will be very negative. If they are told – it is impossible, well, well … And if they are told – it is possible, then they will get a good addition to their main activity. And, most importantly, it will even help their main activity, because there is a requirement for them from the state to utilize, that is, to somehow use 95% of associated petroleum gas (APG). It can be converted into energy, that is, it can be installed in the fields of power plants that will operate on this associated petroleum gas. Oil workers do it, but they do not need electricity in such a volume.

“SP”: – And sell it?

– The fact of the matter is that often the fields are far from consumers, Rosseti did not build electric mains there, so the oilmen themselves need to equip it. And now the question arises, like there is a requirement for the utilization of 95% of APG, power plants have been built that completely supply the companies’ facilities in the fields with electricity from APG. And then this electricity is not needed in such volumes. If there is a settlement nearby and it is possible to supply there, somehow agree that the electricity goes there. But if the settlement is far away, they begin to figure out – how much will it cost to build the networks? And here is the dilemma: to incur additional costs for this construction or just to burn the excess APG and pay a fine? The latter option is often cheaper.

APG is a valuable product, a feedstock for petrochemicals. But for its processing, again, it is necessary to build an infrastructure. Companies are slowly moving towards this. Some companies send APG for processing. Part of it independently separates valuable components: methane is fed into the pipe of Gazprom, and the rest of the fractions are used in a different way. But still there is a lot of this APG. And a number of companies have not yet reached the 95% utilization rate. And many see this mining option as a way to achieve 100% utilization of APG. I installed a power plant, you take part of the electricity for your own needs, and you send everything else to mining. And here you are in a win-win situation. Therefore, oilmen are considering this option, solving the problem of how to utilize APG and not be in the red. Therefore, they ask the government whether it can be done.

“SP”: – Is there a forecast, what will be the answer?

– The question is whether our bureaucratic structures need it. The Ministry of Finance will say: how to administer it, control it, etc., the legislation does not clearly state what it is, therefore, we are against it. But in principle, the idea is beautiful. If you approach this in a smart way, then the state can also make money on it. For example, it will introduce a tax on the mining of oil companies. Or make these funds (from mining) targeted, for example, oblige companies to invest them in the modernization of refineries. Or to raise wages, which, of course, is unlikely. Or the same geological exploration. The state can thus, without spending its money, stimulate investments in the modernization of the oil industry and the development of geological exploration. Everyone will be in the black.

Analyst at FINAM Group Alexey Korenev is more skeptical:

– The Bank of Russia understands the risks of cryptocurrency. No matter how much I praise her Elon Musk, cryptocurrency, in fact, is not backed by anything. In addition to the number of operations that were performed with her, she has no material support. Therefore, it is pure air. You can make money speculatively on cryptocurrency, but keep in mind that if your asset is not backed by anything other than speculative operations, then under some circumstances this asset may collapse to zero. Per day. This cannot be with the dollar. And even with the Turkish lira, this cannot be. In my opinion, even with the Mozambican dollar, this cannot happen, so that today it is, and tomorrow it is gone.

But with cryptocurrency, this is quite possible. She is not provided with anything. Therefore, I am not an adversary, but a cautious skeptic about cryptocurrencies. Until they enter our life so tightly that they are provided with, well, not goods, but at least some state guarantees, it is too early to trust them. That’s when cryptocurrency becomes so popular that central banks of large countries of the world will issue guarantees for cryptocurrency, then – yes, you can pay with it, keep it in your portfolio, accumulate, mine etc.

“SP”: – But in Russia, cryptocurrency is not prohibited.

“But it’s not recognized either. Cryptocurrency is still air. And mining is the conversion of energy into “warm the air”. Because it will work thousands or even tens of thousands of hard drives, which will continuously perform these operations, spend energy in general to nowhere, creating a currency that can disappear at any moment. But now there is an energy crisis, and if the guys have nowhere to sell electricity, since they want not only to burn associated gas, but to receive electricity from it, then let them sell this electricity.

Sell ​​it to China, where two-thirds of the provinces experience intermittent power outages. Recently, the Chinese asked InterRAO to increase the supply of electricity. They buy gas from us at a higher price than Europe. We are ready to resume coal generation, which is experiencing a wild shortage of this fuel after the scandal with Australia. Either the network, they are ready for anything – sell the Chinese electricity, obtained from associated gas, this is real money, with which you can buy something real. In my opinion, this electricity from APG is profitable to sell on the market to those who are willing to pay for it, rather than mine, in fact, air.

“SP”: – Oilmen refer to the unprofitability of the delivery of both associated gas and electricity produced from it due to the remoteness of the fields.

– Is it profitable to mine cryptocurrency? We’ll have to feed those who create the necessary servers that will spin on mining farms. Yes, that there are farms, for serious fishing in this business, whole factories will be required – this will also require considerable investments. But how can you compare investments in the creation of infrastructure for the production of virtual money and investments in logistics for transporting electricity for quite real money?

Cryptocurrency takes off plus 100%, then falls into minus by 50%, then another 70%. Yes, they will collapse four times, and then they will sit down to consider the profitability. And then they will cry. And, God forbid, they will fall under the hot hand of regulators. Therefore, it is better for oilmen, and not only for them, to engage in real production. Population incomes are falling. People are in real need. This is where the effort, business acumen and financial resources come in. Rather than trying your luck in the virtual world, it is better to look for it, directing funds to the development of withered geological exploration, to search for new deposits. And, of course, the development of technologies for extracting natural resources. After all, we are a country insanely rich in resources, including energy resources. And while they are expensive, they need to be sold in order to buy something needed for production, for the development of the country’s economy.

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