Bitcoin Miners Eyeing Argentina’s Natural Gas Dairy Cow

British company FMI Minecraft is working on a project to mine Bitcoin cryptocurrency using natural gas from Argentina’s Vaca Muerta.

The project would be in the free zone of Zapala, in the province of Neuquén, and source of gas of the Vaca Muerta, or shale formation ‘Vaca Morta’.

“Vaca Muerta is great because there are more than 20 producers of good quality gas,” FMI partner Eduardo Meyer told NGI.

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The mining operation would initially involve 100 MW of gas power, which would be expandable to 250 MW. Meyer said Argentina has “good suppliers of turbines and generators and human resources.” He added that “there is a big oil and gas scene in Argentina”.

The project would expand local gas transport capacity, create jobs and all suppliers would be local, Meyer said. “Our plan is to work with the local university to create a service center to fix mining machines.”

With China banning cryptocurrency, most Bitcoin mining is done in North America, but that market has become saturated, Meyer said. Natural gas for energy is cheap in Argentina and the free trade zone makes the project attractive.

Bitcoin mining is the process by which specialized computers verify bitcoin transactions. The process allows miners to add “blocks” of the distributed public ledger, also known as a blockchain, on which transactions are recorded.

“Mining is the way we can make the network safe and secure,” Meyer said. “By doing so, the miner receives an incentive as the network mints a new bitcoin as payment to the miner.”

The key to a project’s success is access to mining machines, which come mostly from China and are behind schedule, Meyer said. The other essential component is energy.

The mining process is highly energy intensive. Over the past year, Bitcoin mining has consumed 204 TWh, as much energy as the country of Thailand, according to a study by technology analytics platform Digiconomist.

“But traditional banks also consume a lot of energy,” Meyer said. “Bitcoin uses a lot of energy, yes, but it is a smarter system.”

Gaining Ground in Latin America

The cryptocurrency has become somewhat popular in the United States, with everyone from celebrities Matt Damon to Larry David promoting it. But it is catching on in Latin America as well.

In a region with a history of high inflation and currency devaluations, cryptocurrency has been hailed by some as the future of financial transactions. El Salvador has adopted Bitcoin as its legal tender. Argentine President Alberto Fernández said he could help combat the country’s torrid history of inflation.

Meyer sees Bitcoin as more of an asset than a currency and a “good hedge against inflation.”

According to blockchain data platform Chainalysis, Brazil recorded the highest value of cryptocurrency flows in Latin America in 2021 at $144 billion. Argentina came in second with US$ 103 billion.

FMI is not the only company joining the Bitcoin mining space in Argentina. Late last year, global Bitcoin mining company Bitfarms Ltd. signed engineering, procurement and construction contracts and began construction of a 210 MW production facility in the country. The type of energy to be used was not specified.

Is Bitcoin a Natural Gas Adjustment?

Argentina is home to abundant natural gas resources. Vaca Muerta was said to be geologically comparable to the Eagle Ford Shale in South Texas. To try to boost exploration and production (E&P) development in the area, the Fernández government held several natural gas purchase bids.

In a hydrocarbon promotion bill sent to Congress in September, the Argentine government also said that natural gas would be an essential part of the country’s energy transition. The project includes price stabilization mechanisms and guarantees that the volumes produced for export will have preferential rates and access to the capital market.

The government has also given the green light for a new Vaca Muerta gas pipeline. The Néstor Kirchner gas pipeline, worth US$ 1.5 billion and 24 Mm3/d, runs from Tratayen, in Neuquén, to Salliqueló, in the province of Buenos Aires. Officials said the pipeline will be operational in winter 2023.

Unconventional production reached a record in Argentina in January of 69 Mm3/d, up 2% from December and 42% from the same month in 2021. Total natural gas production was 130 Mm3/d in January, an increase of 12% year/year. Several E&P companies set aggressive production targets for the year.

At an oil and gas conference in Buenos Aires last week, Argentina’s Energy Minister Darío Martínez said there was no ceiling on oil and gas production in the country and that production was about to “explode”.

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