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| Financing Solutions to Reduce Natural Gas Flaring and Methane Emissions
operations. Difficulties in enforcing flare payments further disincentivize IOCs from taking the initiative to address flaring. In this context, the Nigerian government, after careful planning, opted for a system that relies on third-party developers to implement FMR projects under a competitive selection process and with the obligation for IOCs to allow such developers access to flare sites. Because no FMR project has yet been implemented under NGFCP, it is impossible to draw conclusions about the success of the program.
CRUSOE ENERGY SYSTEMS Background For the growing number of technology companies relying on energy-intensive computing, availability of inexpensive power is key to profitability. Computing applications such as Bitcoin mining, running of artificial intelligence algorithms, and image rendering sometimes require vast amounts of power. A study by the University of Cambridge estimates that Bitcoin “mining”11 uses more electricity annually than all of Argentina, the 30th-largest country by energy use (Blandin et al. 2020; Criddle 2021). Bitcoin prices on the one on hand and mining costs (primarily electricity and computing equipment) on the other determine the profitability of a cryptocurrency miner. In recent years, power-hungry Bitcoin miners and other computing-intensive businesses have set up or shifted operations to regions where electricity, usually generated from hydro or coal, is cheap, often regardless of carbon emissions. Sixty-two percent of miners surveyed globally for a study by the University of Cambridge reported using hydroelectricity; coal came in second (38 percent of respondents), followed by natural gas (36 percent). The breakdown in the amount of energy used by source is a hotly debated topic that is outside the scope of this case study. By Cambridge’s estimates, only 39 percent of Bitcoin mining’s energy consumption is from renewable sources—a figure that would reflect the high concentration of Bitcoin mining operations in coal-reliant regions of China and Mongolia (Blandin et al. 2020). The same study, however, also notes the argument that Chinese Bitcoin miners switch to hydroelectric energy in the rainy season (when China has an oversupply of it), which would increase the overall reliance on renewables. In response to this trend, a few start-ups have emerged in the United States that use associated gas to power cloud computing operations such as Bitcoin mining. Among these are Crusoe Energy Systems (“Crusoe”), EZ Chain, and Wesco. These start-ups differ in their business models but all have the same mission: to reduce the reliance of computing-intensive businesses on electricity from the grid, which in the United States is 19 percent coal-based,12 providing cheap power from gas that would otherwise be flared. This phenomenon is not unique to the United States: the Russian state-owned oil company Gazprom is mining Bitcoin with associated gas in West Siberia (Davis Szymczak 2021). This FMR solution is gaining ground among shale oil producers in the United States, in response to several trends, including the following: • A challenging oil price environment that forces producers to explore any revenue opportunities, including the sale of associated gas. • A tightening regulatory environment. In the United States, flaring regulations vary by state. Each state has provided different incentives or mechanisms to
