YPF starts mining Bitcoin in Vaca Muerta

YPF Argentina activates plan to mine Bitcoin with flared gas

Welcome Avatar! Just a short update here in relation to our previous post about Vaca Muerta, with some news that just came out today. Apparently YPF, the biggest national oil & gas company in Argentina, has decided to start Bitcoin flaring gas mining by transforming excessive natural gas into some hard sats.

The reason why this is a big deal, is because generally Argentina has been pretty reluctant on incorporating anything crypto related in more “official” government projects.

Argies themselves are full-on degens and the local private sector is booming with Bitcoin projects, but this is a first for a more public facing company like YPF.

Drilldown

• The mining equipment is installed in the Vaca Muerta region, owned by the State.

• The project will generate 1 MW, combined with a second phase that would generate 8 MW by the end of the year.

The electricity generator YPF Luz developed a pilot project in Vaca Muerta for generating electricity from residual or vented gas (the technical name is "flared") from hydrocarbon production.

YPF plant in Loma Campana, in the Vaca Muerta region

The development of this first experience began three months ago in the Loma Campana area, the iconic block and the first where unconventional resources were exploited in Vaca Muerta, which are exploited for oil production by the YPF and American Chevron companies.

In an interview with Télam, Martín Mandarano, CEO of YPF Luz said (emphasis added):

“This first pilot, which is already operating, operates with 1 MW of generation and a second project is being developed at the same time to come into operation before the end of the year, of about 8 MW, in the Bajo del Toro area, which also belongs to YPF.
[…]
We began to develop this pilot for cryptocurrency mining with a vision of sustainability and business from flared natural gas, which cannot be used when exploration is being carried out and at the beginning of production of an oil field”¹

It’s great to see the incentives for Bitcoin mining being validated once again. For YPF it is also a great way to get more liquid international currency reserves in, without needing to ask permission from the Argentine Central Bank.

Mara watching the flared gas that will soon be converted into Bitcoin.

Not flared, but converted into value

​​Taking advantage of the waste from other energy processes and stranded energy to generate electricity is a great advantage of Bitcoin mining.

Normally, natural gas on these fields is just flared, contaminating the atmosphere etc. By combusting this natural gas which cannot be captured by other means, and use it for mining on the spot, it does not generate an environmental impact.

YPF Luz saw the possibility of converting this waste into added value and decided to act on it.

The CEO Mandarano made some additional comments (emphasis added) in that same interview that explain very well why Bitcoin mining is such a good fit for projects such as the ones in Vaca Muerta (thousands of miles away from civilization, which makes gas storage hard, which is why companies usually decide to flare the gas):

"Once the well is completed and oil and gas is already in production, the generation and mining equipment will be moved to another well at the start of development, because it is modular equipment and easy to transport. […]
What we are doing is atypical because it is taking the demand to where the supply is, in this case in Vaca Muerta, when normally the supply is somewhere else hundreds or thousands of kilometers away. In those cases you have to build transmission, which is precisely one of the infrastructure problems.”²

Will this be another “meh” news item in a few months?

That is still to be seen. Personally, I think it is a pretty big deal that the company is stating this officially, through official government news channels. It means that this is a serious proposal and not just some newsworthy item just to shill to the public.

It does not impact the everyday life of Argentines (yet), so that is another reason why I thought it was worthy to write about it here.

Usually when it concerns measures that are not hardcore populism (as in, certain groups reading this will gain x now), they tend to be more serious.

Bear markets are for building, so prepare to see more of this in the oil and gas industry around the world.

See you in the jungle, frens!

1. Translated from Spanish: “Este primer piloto que ya está funcionando opera con 1 Mw de generación y en simultáneo se está desarrollando un segundo proyecto para entrar en funcionamiento antes de fin de año, de unos 8 Mw, en el área Bajo del Toro, que también pertenece a YPF” […] “Empezamos a desarrollar este piloto de generación para minado de criptomonedas con una visión de sustentabilidad y de negocio a partir del gas natural de flare, que no se puede aprovechar cuando se está haciendo la exploración y al principio de la producción de un yacimiento de petróleo”

2. Translated from Spanish: ”Una vez completado el pozo y ya en producción de petróleo y gas, los equipos de generación y de minado se retirarán hacia otro pozo en inicio de desarrollo, porque se trata de equipos modulares y de fácil transporte” […] ”Lo que estamos haciendo es atípico porque es llevar la demanda a donde está la oferta, en este caso en Vaca Muerta, cuando normalmente la oferta está en otro lado a cientos o miles de kilómetros para lo cual se requiere construir transmisión que es justamente uno de los problemas de infraestructura”